"Empires such as the former Soviet Union and the Roman empires can collapse quite quickly. The tipping
point is often when the cost of servicing an empire's
debt is larger than the cost of its defense budget.
That has not been the case I think at any point
in US history. It will be the case in the next five
years." -- Niall Ferguson (Harvard professor)

"The path of least resistance is a gangplank.
Capitalism encourages both productivity and consumption.
In its early stages, productivity drives consumption.
In its later stages, the opposite is true. In its
final stage, the debt produced by each destroys
both. Ten years after the bursting of the dot.com
bubble, America is still desperately trying to reflate
the credit bubble that caused its temporary prosperity."
-- Darryl Robert Schoon

"[Bernanke] knows he needs cover for QE2
[huge money printing initiative] and that means
some sort of deflationary shock that scares the
masses and makes many clamor for help like sad scared
little children (we are being conditioned like animals)."
-- Jesse (Cafe Americain)

"But I think something ahead of the markets
is a likelihood of the Fed stepping on the gas once
more, so-called Quantitative Easing. I think that
is likely to happen. The Fed is already clearing
its throat. You can see this in the newspaper leaks."
-- Jim Grant (from Interest Rate Observer)

"Gold and silver are going much higher.
The sky is the limit for gold. Governments are losing
control of gold. They cheat, steal,lie, maneuver...
but gold will beat them and is already doing so,
in stages." -- Harry Schultz

"A gold standard and a redeemable currency&
enable a people to keep the government and
banks in check. It prevents currency expansion from
getting ever farther out of bounds until
it becomes worthless." -- Walter Spahr
(Chairman Dept Economics, New York Univ, 1927-1956,
from an age when universities did not teach economic
heresy)

"As long as the USFed and EuroCB are stuck
at 0%, gold will rise. As long as US and EU banks
refuse to liquidate ruined assets, gold will rise.
As long as the USGovt obstructs or ignores urgently
needed reform, gold will rise. As long as government
deficits remain extraordinarily high, gold will
rise. As long as the USEconomy cannot be revived,
gold will rise. As long as the USDollar sits arrogantly
as the global reserve, gold will rise. As long as
Goldman Sachs controls the USDept Treasury, gold
will rise. Witness the failure of fiat currency
and the central bank franchise model."
-- the Jackass

"If con is the opposite of pro, is Congress
the opposite of Progress?" -- YES

[Editor Note: No price charts will be offered in
this report. Ranges are being defended vigorously,
with some gold slippage, before the assured strong
price breakouts. The previous price charts are still
relevant, but with extensions of selfsame except
for the Euro short cover and the USDX slide. Gold
& silver shortages are growing more acute by
the week. The real story is not technical but rather
in the gradual inexorable breakdown that leads toward
a monumental monetary crisis. Its epicenter will
be all currencies and the sovereign debt that reinforces
them, not just the USDollar. The tectonic plate
that cracks will be gold, where corrupt hands are
losing the tight grip. The breakdown and historical
monetary crisis is fully covered, without commodity
references.]

GOLDEN POTPOURRI

◄$$$ THE GOLDMAN SACHS CIVIL LAWSUIT CASE
WAS SETTLED. THE $550 MILLION FINE WAS 35X THE PROFIT
IN THE ABACUS FRAUD SALE.
NO ADMISSION OF GUILT, NO PLEA OF GUILT, NO FELONY
CHARGES FILED. NO BUSINESS UNIT SHUTDOWN. ANOTHER
MOTIVE EXISTED TO SETTLE. $$$

Head of the Securities & Exchange Commission
Mary Schapiro told a USCongress committee last week
that the SEC was eager to settle the nettlesome
Goldman Sachs case in order free its own resources
up for more cases in the pipeline. Shapiro said
the bulk of failed bank events have yet to occur,
whose treatment will require their time with FDIC
coordination. A $550 million fine was imposed
on Goldman Sachs, the biggest ever on a Wall Street
firm, Talk about asymmetric returns!! Under the
settlement, Goldman paid back the $15 million in
profit from the Abacus deal, but also paid a civil
penalty of $535 million. Restitution would go to
the two banks that suffered losses on the deal,
$150 million to IKB Deutsche Industriebank and $100
million to the Royal Bank of Scotland. The remaining $300 million went to the
United States Treasury as a fine. The fine, although
large, will defuse very little public anger. The
public wanted to see far more financial pain, even
the humiliation of a public trial with horrible
publicity. In 2Q2010 just announced, Goldman Sachs
earned a $3.45 billion profit after the fine. That
comes to $61.5 million per business day. So the
fine cost the syndicate fortress that houses a sprawling
vampire squid a mere nine days of profit. Regard
it as a noteworthy cost of doing business with no
legal consequence, no jail time, no shutdown. But
a shun comes.

The Hat Trick Letter has consistently stated that
the process of meltdown is very early, as banks
have refused to mark down assets, and most big US banks are walking dead.
The tip of a quick settlement was given by Chris
Whalen of the Instituational Risk Analytics. Hundreds
more banks are going down hard. The USGovt deficits
will remain over $1 trillion each year for some
time. The USTreasury default can almost be a scheduled
event. See the Business Insider article (CLICK HERE).

◄$$$ SLOWLY, A EUROPEAN BAN IS STICKING AGAINST
WALL STREET FIRMS FOR BOND MARKET ABUSES. THE FRENCH SEEM THE MOST
ANGRY IN TAKING ACTION. ISOLATION OF WALL STREET PRECEDES ISOLATION OF AMERICA.
$$$

More shun has come to the criminal US
investment banks on the global stage. Their movement
is limited. European governments are formally
ignoring Goldman Sachs in the bond business, as
seen by Greece, Spain, France, and Italy, according
to Dealogic. These nations have blocked GSax
from any lead role in their recent sovereign bond
sales, after a string of enriching past deals. The
firm settled an important lawsuit in order to avoid
a high profile legal trial that would have tarnished
their reputation ten times worse. The charge was
GSax misrepresented investors in a mortgage bond
derivative sale, the Abacus deal. The formerly venerable
firm, cast as extreme rogue nowadays, admitted merely
that its marketing materials were incomplete, since
no mention was made that the third party helped
choose the assets in the fund, but had taken a large
investment position against them. No crime was charged
nor admitted. A truckload of manure was dumped on
the GSax lawn, then removed at a cost, but the extreme
stench remains. GSax has become more of a pariah
in Europe than the United
States.

European governments have reacted swiftly and angrily,
after unearthing data on past transactions involving
Goldman with Greece
and Italy.
The investment securities which the bank set up
to sell, helped to conceal the size of government
debt and were arranged with GSax as beneficiary
after the debt was downgraded. The Greek Govt is
at war with the bank. Spain has cut out GSax
as its top bookrunners in 2010, while Italy
has cut them out in a leading role since 2007. France
has cut out GSax in any lead slot over the past
three years, a situation that seems permanent. A
person linked to the French Treasury was quoted
as saying, "French people would riot in
the streets if we chose Goldman." The French
Govt has firmed its adversarial position against
investment banker bonuses and their practice of
making large investments in opposition to the sovereign
bonds they work to sell as brokers. The French and
Spanish Govts have acted more conservatively, making
debt issuance only in Euros, staying away from complex
currency swap contracts that came back to bite Greece
and Italy. A growing list of European governments
strive to simplify their bond deals in order to
preserve their cherished AAA rating, which keeps
borrowing costs down. See the UK Guardian article
(CLICK HERE)
and the New
York Times article (CLICK HERE). We
are very early in the isolation process. Unfortunately,
the banning of Wall Street will eventually result
in US isolation. Investment banking goes hand in
hand with commercial partnerships. This is one more
step toward the Third World for the United
States.

◄$$$ RUMORS SWIRL OF LONDON METAL EXCHANGE THEFT. THIS COULD BE COVER
FOR THE ABSENT PHYSICAL METAL IN THE LONDON
L.B.M.A. EXCHANGE. REALITY IS HITTING LONDON,
WHICH NEEDS A COVER STORY. $$$

A reliable subscriber from California,
with several good sources, reports that the Wall
Street Journal might soon be coming out with an
important story to the effect that thieves
have hit a major UK
metals warehouse. The site is most likely
London. Certainly, the story would show a link to the London Bullion
Metal Assn. One can only guess. So the London bankers could attempt to sidestep responsibility, claim it aint
their fault, on how the gold & silver is all
gone. This sounds like the argument by the kid at
school that the dog ate the homework. Hey, sure,
why not?? Expect, if it is published, to be a lame
attempt at a cover-up for missing gold & silver
metal. The shortage has become so acute since the
December assaults by depositors began, that the
LBMA must conjure up a story to conceal their empty
vaults. Depositors have been removing precious metal
in huge volumes, suspicious of fraud, fearful of
lost wealth. My view is simple. Either way, admission
of NO METAL is a major major step in breaking
the corrupt spine of the illicit gold cartel.
Any route that leads to broad recognition of NO
METAL is fine with me. Let them try to save face.
Let them announce the metal fell in an earthquake
fault line, or was teleported by Spock to the Starship
Enterprise, or was carted off to an alien spaceship
in an inter-galactic raid. It will not work. Outright
derision is the likely response by the public, after
so many chapters of bold naked fraud. The response
would be a rise in the gold price from absent supply
and growing demand, after a bank run heated up.

◄$$$ OBSTACLES TO GOLD COIN PURCHASES TO
BE IMPOSED BY YEAR 2012. TARGETED ARE PURCHASES
OF ANYTHING OVER $600 IN PRICE. THE LAW MIGHT BE
WIDELY IGNORED. THEN AGAIN, IF EXTREME COIN SHORTAGES
COME, THEN THE REGULATORY PAPERWORK WILL NOT MATTER.
EXTREME COIN SHORTAGES ARE HERE IN THE MARKETPLACE,
RIGHT NOW! $$$

The Numismatic News reports on a storm of paperwork
soon to hit the coin collector world. The cartel,
with USGovt tail wagging, wishes to obstruct the
gold coin movement and its fast growing demand.
Passage by Congress of the national Health Care
Bill has had side effects. Coin buyers of all
stripes (collectors, dealers, estate liquidators)
will be required to complete new Internal Revenue
Service 1099 forms for coins and other products,
as of January 2012. The threshold for filing
completed forms begins at $600 for coins or bullion,
regardless of payment method, a very low level sure
to produce a blizzard of paperwork. See the Numismaster
article (CLICK HERE).
A tax expert colleague pitched in. He said, "It
is all nonsense, and unlikely to be widely followed.
The sections of IRS code upon which this is all
based, only applies to government workers and Federal
contractors. Of course, most people (especially
vendors) do not realize this, and the IRS is not
exactly going to clarify. So neglect and disobedience
are likely to be our saving grace." A wider
perception and effect is in progress. The blizzard
of forms, regulations, and programs is too much
for most people and businesses to tolerate, which
are struggling to survive. Most will ignore the
USGovt with the view that it is long past out of
control.

Andy Schectman is a widely known and respected
gold bullion dealer from Miles Franklin, with focus
on coins. He warns that the trend in coin purchase
demand is powerful and exceedingly one-side, with
paltry supply coming forward from sales. In fact,
he warns that coins might not be available at all
before long. He said, "In years past, we
used to do a lot of business with people wanting
to sell. Today, virtually no one is selling their
coins back to us. In fact, for every 100 transactions
we have, maybe one is a seller, the other 99 are
buyers. Our largest supplier, who provides over
60% of all bullion to the US market, told me earlier
this month they have days without one single buy
back. And this is from the largest supplier in the
United States."

◄$$$ THE SWISS BANK SYSTEM IS UNDER GREAT
DISTRESS. WORD HAS COME OF A NEW SECRETIVE LAW TO
LIMIT BULLION AND MONEY EXITING THE COUNTRY. THE
NEW LAW HAS NOT BEEN MADE WIDELY KNOWN. $$

A reliable source from the German banking system,
with high level associates in Switzerland, informed me that
the Swiss Govt has reacted to the massive exodus
of bullion from their nation. He wrote, "Just
talked with a colleague in Zurich.
He mentioned the Swiss recently passed a banking
law that allows them at any time to stop the transit
of bullion (and perhaps cash) OUT of the country.
If instituted, foreigners would just be given certificates,
but could not take possession. This legislation
was passed in case of 'emergencies' that stress
the system." The law is surely buried in
bank regulations, kept from the public eye. All
attempts to confirm the law with lower level contacts
in the Swiss financial sector resulted in no word
either way. My trust of the source is unflinching,
as his track record is incredible.

◄$$$ A RUSSIAN RING SEEKS INFORMATION ON
GOLD. IN TIME GOLD WILL BE MORE RECOGNIZED AS THE
ACHILLES HEEL OF THE ANGLO FINANCIAL GAME. SOME
USGOVT DISINFORMATION HAS COME FROM THE STORY, A
SIGNAL OF ITS EXTREME RISK. MY BELIEF IS THAT THE
PRIMARY AND SECONDARY OBJECTS OF THE RUSSIAN PENETRATION
WERE GOLD AND GOLD. $$$

Since the Dawson Creek Conference in the Yukon
Territory, hosted in August 2005 with some of the
world's most prestigious bankers in attendance,
excluding those from the United
States and England, the global perception of the Anglo gold
game has been revealed. The Russian central bank
at the time did an abrupt turnaround. After Dawson Creek, the Russian central bank stopped 100% of its gold leasing
to the US
& UK,
upon realization that they had been duped and swindled.
The Russians have been engaged in information gathering
ever since, as espionage has entered the gold world.
Gold is located at the nexus of the global monetary
system vulnerability, with the USDollar as its nucleus.
The developing story apparently involves various
Russians, some of whom might be operating under
Irish names. A trade of US agents for arrested Russian
agents defused the situation, in full public spotlight.

The US-based news sources claim the Russian spies
are Goldbugs who plotted to destroy the USDollar.
They are more likely agents to produce a sound monetary
system, fighting the US
& UK bank cartel. In telling the story, the
Anglo sources will attempt to paint a picture where
blame for a USDollar demise is the fault of foreigners.
The US$
will fail on its own merits. Past failures and bond
fraud are apparently overlooked, as is IMF arm twisting.
What seems obvious is that the Russian Govt comprehends
that information on Gold, the USDollar and USTreasurys
is of high state value. The story tells a biased
account on how Russia
is gearing up on a conceived plot to destroy the
USDollar by instituting a new global currency backed
by gold. True enough, as the fight for survival
requires a solid monetary foundation, and the
global system constructed atop the USDollar is in
failure mode. A viable replacement is urgently
needed. People who own gold or seek out insider
data on gold are deemed enemies of the US
state.

The spun news story alleges that the Russian spies
were focused upon the CIA leadership, the Obama
Admin, and activity in Afghanistan. Jim Rickards, senior director for
market intelligence at Omnis, mentions how the FBI
complaint cites the global gold market as one of
the key objects of interest of the Russian Federation and its
SVR intelligence agency. Rickards said, "On
a number of occasions, the SVR specifically indicated
that information collected and conveyed by the New Jersey conspirators was especially valuable. Thus, for example,
during the summer and fall of 2009, Cynthia Murphy,
the defendant, using contacts she had met in New
York, conveyed a number of reports to [Moscow] Center about prospects for the global gold market."

The news story claims that in late 2009, the Kremlin
dramatically reversed its official stance on gold
and actions thereupon. Before October 2009, Russia had been on course
to sell nearly 25 tonnes of gold into the market.
In November 2009, however, one month after Murphy's
alleged report to the SVR about gold, Russia started stockpiling
the precious metal, selling nothing out of country.
In November 2009, Russia's
central bank bought more than $1 billion of gold
from the foreign exchange market in order to better
control the price of the ruble, according to central
bank deputy chairman Alexey Ulyukayev. The credit
crisis was in full swing. Analysts on contrary ground
argue that Russia's
move into gold was a manifestation of deep USDollar
disappointment, and disrespect for USFed Chairman
Bernanke. Anger and disgust would seem normal,
to show reaction and disdain for a US$ central banker
who minimizes the stated risk of currency debasement
via a printing press operated at a boasted zero
cost, and who expanded the US$ money supply by leaps
& bounds for the benefit of Wall Street redemption
of worthless bonds.Russia
might have simply followed in the Chinese footsteps,
which in 2005 halted all export of gold bullion
products. The two Asian nations are working very
closely on major energy projects, and consult freely.
The Russian central bank continues to purchase gold,
adding 26.6 tonnes in the most recent quarter, bringing
its holdings to over 668 tonnes. That is a paltry
total for any major nation. Other central banks
of several countries have been avidly accumulating
the precious metal, including China,
Venezuela, and India. The nation of India alone purchased
200 tonnes of gold in November 2009, with IMF blessing,
without any criticism of trying to wreck the USDollar
regime. Any gesture made outside the Anglo War Room,
the helm of control, is deemed divisive and subversive.

◄$$$ GOLD HAS BEEN ELEVATED IN IMPORTANCE
AND PRESTIGE AS A CONSEQUENCE OF THE RUSSIAN SPY
RING INCIDENT. GOLD CAN BRING DOWN A FINANCIAL SYSTEM.
IN PAST WORK, RICKARDS OUTLINED A CURRENCY WAR SCENARIO
THAT THREATENS THE USDOLLAR, WITH GOLD HOLDING THE
POTENTIAL. MY GUESS IS THAT HE ANTICIPATES SUCH
AN ATTACK, A CLIMAX EVENT TO THE COMPETING CURRENCY
WARS. $$$

Central banks must pay as much attention to the
gold market as they do their own bond markets. Gold,
after all, serves as collateral to the central banks
and their monetary system, based entirely on faith.
Central bankers have done much to destroy that faith.
They have been on a reckless course for almost twenty
years in removing their gold collateral, a strong
signal of bankrupt leadership in the mental chambers.
Consultant Rickards wrote an important white paper
entitled "Economics & Financial Attacks"
which created an imaginary Pentagon war game in
which Russia used its gold reserves to create a new
global currency and destroy the value of the USDollar.
In the May 2009 paper, Rickards suggested that
US intelligence agencies would do well to track
the gold reserves of other countries as a precaution.
This story reports on a watershed event. Gold is
a great investment in credit crisis times marred
by monetary tumult. Survival is not a subversive
endeavor. The risk and travesty of unchecked USDollar
printing, the redemption of failed bonds, the placement
of banker bonuses despite failure, and the adoption
of fraudulent firms are the more relevant acute
subsersive activities, all sponsored from within
by the USGovt and USFed. Their mission is to preserve
the power of the elite bankers, to prevent disclosure
of gigantic fraud accompanied by prosecution, and
to avoid asset liquidation that would bankrupt their
masters. See the Information Liberation article
(CLICK HERE) or the GoldSeek
article by the Gold Anti-Trust Action committee
(CLICK HERE) or the Alphaville
article (CLICK HERE).

Rickards explains the threat, not of a collapse
but extreme undermine of the USDollar via a significant
devaluation. The financial attack could be rendered
via gold. Russia
could be the party in opposition, although much
more likely the adversary would be a consortium
of nations that includes Russia. Take for instance
the advocates of the New Nordic Euro and those nations
that support its usage in banking and commerce.
He described the rough cuts to the financial attack
on the USDollar. He wrote, "Worse even than
the long slow grind along the bottom is a sudden
catastrophic collapse. In that context, the greatest
threat to US national security is the destruction of the
USDollar as an international medium of exchange.
By destruction we do not mean total elimination,
but rather a devaluation of 50% or more versus
broad based indices of purchasing power for goods,
services, and commodities, and the dollar's displacement
globally by a more widely accepted medium.
The intention of the Central Bank of Russia would be to cause a 50% overnight devaluation
of the USDollar, and to displace the USDollar as
the leading global reserve currency. The expected
market value of gold resulting from this exchange
offer is $4000 per ounce, i.e. the market clearing
price for gold as money on a one-for-one basis.
Russia could begin buying
gold at the market [price] (perhaps $1000 per ounce
initially). However, over time its persistent
buying would push gold as money to the clearing
price of $4000 per ounce. However, gold selling
would stop long before Russia
was out of cash, as market participants came to
realize that they preferred holding gold at the
new higher dollar denominated level. Gold will
actually be constant [relative to crude oil,] as
in one ounce = 25 barrels of oil. It is the dollar
that depreciates. Another important concept
is the idea of setting the global price by using
the marginal price. Russia
does not have to buy all the gold in the world.
It just has to buy the marginal ounce and credibly
stand ready to buy more. At that point, all of the
gold in the world will reprice automatically to
the level offered by the highest bidder, i.e. Russia.
Basically, the mechanism is to switch the numeraire
from dollars to gold. Then things start to look
different, and the dollar looks like just another
repudiated currency as happened in Weimar and Zimbabwe.
Russia's paper losses on its dollar securities are
more than compensated for by (a) getting paid in
gold for its oil, (b) the increase in the value
of its gold holdings (in dollars), and (c) watching
the dollar collapse worldwide." The above
is a highly credible and possible scenario. Rickards
paints a scenario with extreme realism, a prescient
piece. See the Unrestricted Warfare Symposium website
article for the original essay (CLICK HERE)
and the Cafe Americain article (CLICK HERE).
Regard such an attack as a climax event in the Competing
Currency Wars, whereby the unjust unworthy corrupted
USDollar is de-throned.

◄$$$ A NEW UNITED NATIONS REPORT CALLS FOR
ABANDONING THE USDOLLAR AS THE MAIN GLOBAL RESERVE
CURRENCY, SAYING IT HAS BEEN UNABLE TO SAFEGUARD
VALUE. PRACTICALITY OPPOSES USGOVT. $$$

Certain European officials attending a high level
meeting of the United Nations Economic & Social
Council have made a firm stand, defending a position
that the financial marketplace, not politicians,
should determine what currencies countries would
keep on hand for reserves. Value must be determined
by equilibrium in a free process, not decree. The
UN World Economic & Social Survey 2010 wrote,
"The dollar has proved not to be a stable
store of value, which is a requisite for a stable
reserve currency. Motivated in part by needs
for self-insurance against volatility in commodity
markets and capital flows, many developing countries
accumulated vast amounts of such US$ reserves during
the 2000s... A new global reserve system could
be created, one that no longer relies on the United States dollar as the
single major reserve currency. [A new reserve
system] must not be based on a single currency or
even multiple national currencies but instead, should
permit the emission of international liquidity (such
as SDRs) to create a more stable global financial
system. Such emissions of international liquidity
could also underpin the financing of investment
in long-term sustainable development."
The report stated that developing countries have
been harmed by the USDollar's loss of value in recent
years. The report supports replacing the USDollar
as global reserve currency with the Intl Monetary
Fund's special drawing rights (SDRs), an international
reserve asset that is used as a unit of payment
on IMF loans. It consists of a basket of major currencies.

The tug & pull from both the great need and
ensuing debate is broad based. Jomo Kwame Sundaram
is a Malaysian economist and the UN assistant secretary
general for economic development. He told a news
conference that "There is going to be resistance
[to any plan]. In the whole post-war period, we
have essentially had a dollar based system."
He is of the opinion that the gradual usage of SDRs
could serve an important role for countries to phase
out the USDollar. Nobel Prize economist Joseph Stiglitz
previously chaired a UN expert commission that evaluated
proposed solutions toward the overhaul of the global
financial system. He has recommended the creation
of a new reserve currency system, with possible
support for the SDR vehicle. Russia
and China have also supported
the SDR concept. My view is that the SDR can
adequately serve as a Straw Man, a basket vehicle
fashioned of the same discredited currencies, for
the unexpressed purpose of enabling certain distinct
steps away from the USDollar. Once the USDollar
has lost its leadership role, and the collection
of fiat currencies are tethered and controlled with
fixed exchange rates, or in a narrow band, then
the collection can be discarded more easily in favor
of a new global currency backed by gold.
Some doubt lingers among the UN brain trust, hardly
a formidable body of mental talent on the subject,
since the United Nations has transitioned into an
angry backwater of numerous small nations. Some
criticize the UN as operating with more African
nations that the rest of the world combined. What
is most important is the debate momentum.

Paavo Vayrynen is the Foreign Trade & Development
Minister from Finland. He said, "[It
is probably not possible] to make any political
or administrative decisions how to formulate the
currency system in the world. It is based on the
markets. I believe that the economic players in
the market are going to have the decisive influence
on that issue." The European Union development
commissioner Andris Piebalgs believes it a bad idea
to attempt to dictate what the reserve currency
should be. He said, "It is markets that
decide. Any intervention would just create additional
challenges and make things even less predictable.
These men are more idealistic, and seem to minimize
extraordinary US & UK
pressure to preserve their global banking power
held for two generations. See the Reuters article
(CLICK HERE).

The challenges require far more political clout
and banking stature than anything coming from the
United Nations. It will take major global powers
working together, unfortunately without the dismissive
and dictatorial tendencies from any Anglo participation.

Recall the Jackass Axiom: The first nations
that abandon the USDollar will emerge as the new
leaders in the next monetary chapter in the modern
age, while those who refuse to the end will face
total ruin.

Recall the Sound Money Axiom: No paper
currency, or derivation of paper currencies, can
displace a paper currency (such as the USDollar)
used for the purpose of global reserve.

◄$$$ UNRESOLVED DEBT WILL KILL THE USDOLLAR.
WHILE HOME EQUITY HAS COLLAPSED, THE MORTGAGE DEBT
PORTFOLIOS (MORTGAGE BONDS AND BANK-HELD LOANS)
HAVE NOT. GREAT SINKHOLES EXIST IN BANK BALANCE
SHEETS. MORE DEBT MONETIZATION COMES, OR MUCH MORE
BANK FAILURES COME SINCE INSOLVENCY IS HUGE AND
WORSENING. $$$

Consider some basic financial data points. Between
spring 2006 and spring 2010, the total value of
American homes declined by roughly $7 trillion,
from $20 trillion to $13 trillion. During the
same timespan, mortgage debt on the same stock of
US homes fell by only $270 billion, from $11.95
trillion to $11.68 trillion. The lending institutions
have not kept pace with equity decline by a 26:1
factor. If 70 million homeowners exist in America,
then on average they each have lost $100 thousand
in home value. Simple math.

The housing debt must be resolved, and the gap
narrowed. Resistance by the bankers continues in
credit asset writedowns. They live in a fantasy
land marred by hidden sinkholes sure to be felt,
and soon. Home values continue their descent in
value. The gap widens. Households have encountered
reality, but the banks refuse that same reality.
Widespread bank failures are due, but resisted.
The banks are largely insolvent, the true reason
why lending volume is down hard. The USFed under
Bernanke has monetized only $1.5 trillion dollars
to date. Another $5.5 trillion more monetization
to go. Even European banks remain vulnerable to
similar sinkholes, since they hold a raft of US$-based
bonds of all stripes. See the Cafe Americain article
(CLICK HERE).
My forecast three years ago was for at least $2
to $4 trillion in bank losses to be realized. At
the time it earned both compliments and derision.
It is coming.

MONETIZATION
REVERSE BONANZA

◄$$$ GOLD PERFORMS WELL DURING TIMES OF BOTH
INFLATION AND DEFLATION. IN TIMES OF EXPANSION,
THE PRICE INFLATION FACTOR IS STRONG TO PUSH UP
THE GOLD PRICE. IN TIMES OF DEBT CRISES, THE ASSET
PRESERVATION FACTOR IS STRONG TO PUSH UP THE GOLD
PRICE. MORE IMPORTANTLY, WHEN ULTRA-LOW INTEREST
RATES PREVAIL, ESPECIALLY IN THE ZERO PERCENT CLIMATE,
GOLD THRIVES. $$$

If the zero percent climate does not change,
the gold price will explode, as a hyper-inflation
threat threatens to hit. A paradox is at work.
Gold performs very well in both times of monetary
inflation and monetary deflation. The money supply
grows briskly in good times, and faster in bad times,
due to heavy stimulus and rescues of failed firms.
Gold tends to increase in price in times of monetary
inflation, because it serves as an excellent hedge
from central bank debasement of the currency, and
its scourge effect in price inflation. Governments
print money recklessly, always have, and always
will, with the climax in progress in these current
months, as the recklessness has turns psychotic.
The banking leaders have broken from reality,
unable to witness the capital destruction like wrecked
industry, denying its pervasive effect, from resorting
to failed policies repeatedly. Redeeming failure
is not even a tenet plank of capitalism, a path
the United
States has long departed from.

Gold tends to perform well when price inflation
is mild, when long-term bond yields are tame, when
the perceived risk levels are low. Price inflation
is the constant feature, thus so is gold price rise.
When economies falter, recession is entered or dabbled
with, a powerful phenomenon remains at work. The
true price inflation rate usually continues to exceed
the long-term bond yield offered to savers to hand
over funds with trust. Hence, the real return
on savings tends to remain negative. That enables
gold demand not only to rise, but to start the process
like in 2002. The monetary cycle has been established
as clear. Deflation, in terms of falling asset prices
amidst economic recession, is a prelude to monetary
inflation, which itself often results in strong
episodes of high price inflation. In the current
situation, the risk of at least brief hyper-inflation
is acute. The fiat currency regime is failing before
our eyes, and desperate actions to save it have
put price inflation as an extreme risk in outcome.
The systemic failure is most visible in the 0% interest
rate, a stuck situation with no policy alternatives,
NONE!! Gold is thus stuck going up!!

The aspect of gold demand that eludes the mainstream
consistently, month after month, is its basis in
expectation of a monetary event, even a big
historical monetary event. As the event unfolds
further, like with breakdown in the US & UK
& EU banking systems, then the breakdown in
sovereign debt, and recently the breakdown in monetary
discipline as seen in powerful Quantitative Easing
(money production), gold demand soars. Also, on
sheer competitive grounds, gold shines by comparison
to the multitudes of tarnished unworthy assets that
attempt to attract investment funds. Take mortgage
bonds, hard property assets, stock equity, municipal
bonds, and lately the government bonds. They stink
on ice, as gold shines brightly. See the Cafe Americain
article (CLICK HERE).

◄$$$ JIM RICKARDS EXPLAINS SIMPLY THE COINCIDENT
CONDITION OF INFLATION & DEFLATION BOTH EXISTING.
MUCH CONFUSION HAS COME TO THIS DEBATE. MUCH CONFUSION
IS DESIRED ON THIS ISSUE IN ORDER TO OBFUSCATE THE
MAMMOTH MONETARY INFLATION BY THE USGOVT AND USFED.
ONE DOES NOT EXIST WITHOUT THE OTHER, AS BOTH INFLATION
AND DEFLATION CO-EXIST. THEY WRECK HAVOC IN DIFFERENT
SECTORS IN A ROLLING SEQUENCE OF DESTRUCTION. $$$

Jim Rickards of Omnis wrote, "Both China and the United States had massive misallocations of capital
for different reasons. In China it was central planning... In the United
States we have misallocation
of capital because of the Fed's interest rate policy.
Too low for too long, going all the way back to
2002... We have massive inflation here and now,
and we have massive deflation here and now. And
these forces are [hardly] canceling each other out.
So the indices appear well behaved, but beneath
the surface this is not price stability. This is
a highly unstable situation... For example,
take commercial real estate. Wilbur Ross is very
involved in that. The bid offer on a lot of this
stuff in the community banks is 30 points [i.e.
30 cents per dollar]. You know, the offer is 80
and the bid is 50, and there is scarcely a market.
So if the price is up here and it should be down
here, that is a kind of hidden inflation. The Fed
is not allowing healthy deflation to happen, and
that is a kind of inflation." Read that
quote at the end a couple times for its effect.
The USFed is not permitting impaired assets to clear
in their markets at proper prices. That in effect
keeps perceived prices higher than true value, which
he carelessly calls inflationary. The usage of the
words inflation and inflationary are a travesty.
The forcible lift in perceived prices is a disruptive
influence on price setting, as in exaggerated prices
set, which is not inflation at all. He describes
a ruined market, not price inflation.

◄$$$ JIM GRANT EXPECTS ANOTHER POWERFUL ROUND
OF MONETARY EASING. HE IS CONFIDENT OF QE2.0 RIGHT
AROUND THE CORNER. AMBROSE SECONDS THE OPINION.
ROYAL BANK OF SCOTLAND WARNS OF UPCOMING
MONSTER MONEY PRINTING BY THE USFED. THE CHORUS
BUILDS. $$$

Jim Grant joins the chorus of wise men within
the financial industry who anticipate a continued
extravaganza of monetary printing, another iteration
of QE. They see how the temporary lull in extreme
monetary inflation and the economic stall leave
the USFed only one choice, more Quantitative Easing.
The first round involved $2.5 trillion. Ambrose
Evans-Pritchard expects the next round to be coordinated
$5 trillion global initiative. Vast monetization
of debt and sustained stimulus & rescue are
the only option left to central bankers. Their franchise
model has failed. Endless crutch support is their
constant refrain, their glory epitaph. Ambrose expects
the doubling in the gold price the second QE2 is
publicly announced. It will rise as demand explodes,
but the criminal paper gold machinations will ramp
up also, maybe redouble. The indomitable Grant remains
highly critical of Janet Yellen, Steve Diamond,
and Sarah Bloom Raskin, as he ridicules the USFed's
100% track record of not only focusing on the wrong
thing time after time, but getting the response
consistently wrong with 100% precision. Ouch!! On
the three board members, Grant mocks their voting
record and fine credentials with monetary theory
hobbies, not dedication. Ouch!!

Grant wrote, "Deflation is a funny thing.
It is a word that is much in the news, much in the
markets, but is all too infrequently to find...
So in 2002 and 2003, Alan Greenspan, then chairman,
and Ben Bernanke, then a newly fledged governor,
were out giving speeches saying that deflation is
a clear and present danger. At the Fed, we must
cut rates dramatically, which they did to 1%. But
the price indices today are much weaker than they
were in 2003. So where is the Fed? Why not broach
the topic of deflation again? So what I blame
the Fed for, among other things, is a lack of intellectual
rigor and forthrightness." Ouch!!

Evans-Pritchard wrote, "We are much nearer
the tipping point today. The M3 money supply has
contracted by 5.5% over the last year, and the pace
is accelerating... There is no doubt that the Fed
has the tools to stop this. 'Sufficient injections
of money will ultimately always reverse a deflation,'
said Bernanke. The question is whether he can muster
support for such action in the face of massive popular
disgust, a Republican Fronde in Congress, and resistance
from the liquidationists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble."
Colleague Craig McC from Northern
California pitched in, saying "The Fed is
going to print print print. Yellen's appointment
as Vice-Chairman assures it. Dissenting Fed Governors
will be forced out." See the UK Telegraph
article (CLICK HERE).

◄$$$ FIAT MONEY ENABLES THE UNITED STATES
TO EMBEZZLE THE WEALTH OF NATIONS THAT RUN SURPLUS
ECONOMIES. SOME CALL IT HIDDEN CONFISCATION DOMESTICALLY,
BUT IT HAS A HIDDEN GLOBAL FUNCTION AS WELL. EMERGING
ECONOMIES WITH SURPLUS ACCOUNTS INVEST IN FOREIGN
BONDS BASED IN FIAT CURRENCY. CHINA AND OTHER NATIONS ARE RECOGNIZING THE GREAT
SWINDLE. $$$

The primary architects of the current fiat monetary
system are slowly being discredited, Nobel Prizes
or not. Milton Friedman promoted the theory of floating
exchange rates, on which the international monetary
system has been based since 1971. But heavy handed
control of those exchange rates enables a nasty
bully regime to operate freely. Simply stated,
the floating exchange rate system advocated by leading
prestigious economist has permitted a scheme to
embezzle the surplus balances of emerging economies
that have successfully embarked on an industrial
path. In the past, any formal effort to preserve
a currency has been met with hostility by the Anglo
institutions of the World Bank and the Intl Monetary
Fund. The label of 'Currency Manipulator' has led
to harsh retaliation like trade sanctions, even
continual fear by the smaller nations. Foreign nations
are discouraged from reducing their currency values
that would win an export advantage. They are enticed
into a slow moving trap of currency rise from their
own economic success. A coercive regime has resulted,
claims Antal Fekete, economics professor in the
Canadian Maritime provinces. Any currency rise to
a producing nation results in a US$
decline, and thus a decline in their US$-based reserve asset holdings. From their own
progress, the consequent upward currency revaluation
forces a US debt writedown without
agreement or accord. Thus the embezzlement, he argues.
They are in essence victims to the US Ponzi system,
realized when the USDollar devalues.

Fekete wrote, "[The regime] is designed
to protect the scheme whereby the dollar balances
of the surplus countries are stealthily embezzled.
It works as follows. The United States lures the unsuspecting surplus country
into the Black Hole of currency revaluation against
the dollar. As their currencies are floating upwards,
a part of the surplus country dollar balances is
appropriated by the United States. In effect,
the US is forcing its trading partners running a surplus
to grant, unwittingly, a partial debt abatement.
This exhausts the concept of embezzlement. The US, bankers to the world, conspires to short change
its depositors using the smokescreen of floating
foreign exchange. This regime, based on plunder,
cannot endure. The only equitable monetary system
is the one based on fixed exchange rates. And the
only durable way to fix exchange rates is to make
the currency redeemable in gold. Friedman's theory
is a blot on science and on the good faith of the
United
States in its dealings with
its neighbors."

A nice summary indictment of accepted Keynesian
principles was written by financial analyst Moses
Kim. He wrote, "The flight to safety is
a reflection of the growing realization that a broad
based debt repudiation is coming. This should not
be a surprise, as sovereign nations never repay
their debts. We are getting a history lesson in
real time, but most people have no clue. We have
already tried the Keynesian elixir of debt financed
stimulus to no avail. The global economy is
clearly starting to roll over, as Keynesians scratch
their head in confusion. We can stimulate
all we want, but it will have no effect.
Unfortunately, another round of stimulus is most
likely coming. Take this as a sign of desperation.
Our genius leaders will never figure it out: we
need to revalue, and we will revalue."

BIG B.I.S. GOLDEN
FLY IN THE OINTMENT

◄$$$ THE BANK FOR INTL SETTLEMENTS SUPPOSEDLY
LEASED HUGE AMOUNTS OF GOLD BULLION TO BULLION BANKS
CAUGHT SHORT, AS WELL AS CENTRAL BANKS, MAYBE EVEN
TO METALS EXCHANGES. A DIRE SITUATION IS PAINTED
FOR THE GOLD BANKS. EVERYTHING IS ON THE EXTREME
EDGE, AS DEFAULTS ARE NEAR. $$$

The Gold Anti-Trust Action committee often publicizes
the admission made by the BIS official William White
at an internal Basel
conference in June 2005. Among the five objectives
of central bank cooperation, in the words of White
is, "the provision of international credits
and joint efforts to influence asset prices (especially
gold and foreign exchange) in circumstances where
this might be thought useful." The BIS
policy is plain, in suppressing the gold price,
despite owning a significant hoard themselves. The
policy reads, "The gold has not entered
the open market, ... [but] if the banks that loaned
the gold are for some reason unable to make good
on the loan, the BIS could opt to sell the gold
in order to get its money back, which could amount
to flooding the market with an unexpected boost
to the global supply." Check the speech
(CLICK HERE). A run on European commercial
banks is in progress, for their gold, and the BIS
is the last line of defense before outright default.

The BIS extended massive loans valued at $14 billion
backed by gold to commercial banks in recent months,
in exchange for foreign currencies, mainly USDollars.
The magnificent volume of the recent swaps, involving
349 metric tonnes of gold, reflected the great stress
that the international banking system is under,
a symptom of the ruinous situation with sovereign
debt. The sheer volume aroused great suspicion,
since gold bullion had to surface from vast hidden
supply locations. The Wall Street Journal wrote,
"The enormous amount of gold involved,
nearly tripling what the BIS itself owns,
left many market participants wondering about the
nature of the deals. The BIS declined to identify
the commercial banks involved. The BIS report indicated
that all its outstanding Gold Swaps are set to expire
in less than one year, when the borrowers are obliged
to repay the loans and repurchase the gold. The
swaps are backed by gold held at central banks...
Through an arrangement called Gold Swap, financial
institutions exchange gold with the BIS in return
for cash, agreeing to buy back the gold at a later
date. The practical implications for the gold market
are limited, because the gold has not entered the
open market. By contrast, the BIS reported that
it had no Gold Swaps outstanding at the end of the
prior fiscal year. Gold Swaps have rarely been
used at the BIS in recent years, largely because
capital was often readily available in the marketplace.
It is not clear what prompted the banks to borrow
from the BIS instead of their central banks."
The January timing of the transactions coincides
with a fever that gripped European banks over Greek
Govt debt. See the Wall Street Journal article (CLICK
HERE).
The situation describes a bank run for their gold,
many types of banks.

◄ A HUGE AMOUNT OF GOLD SWAPS WERE CONDUCTED
BY THE B.I.S. TO BAIL OUT PRIVATE BULLION BANKS.
ORGANIZED LOOTING OF SOVEREIGN WEALTH IS THE OUTCOME,
AS OFTEN PUBLICLY OWNED GOLD IS ROUTED TO PRIVATE
WEALTHY HANDS, IN EXCHANGE FOR PAPER MONEY. $$$

A huge volume of Gold Swap contracts is being used
to bail out private bullion banks. Clearly, an event
was averted, either a default by the banks or exposure
of corrupt leasing improperly of allocated accounts.
The public sale of gold by the IMF could have been
intertwined, which has been secretive and selective.
It might not have been a legitimate sale to raise
funds, but a means of bailing out the bullion banks.
Their gold could have been previously on lease and
sold into the public markets. Due to tightness of
supply in the physical bullion market, increasingly
disconnected from the NY-based paper market, great
shortages appear to have occurred. Several private
bullion buyers, including Eric Sprott, have recent
experiences with the corrupted IMF. The Sprott
attractively priced offers in clear terms to buy
large tranches of gold from the IMF were turned
away as 'ineligible' supposedly. The IMF sells
at the lower prices ex-market to selective 'club'
members. It appears that they, and certain European
central banks, are possibly managing this through
BIS.

Harken back to when Gordon Brown sold England's
gold at artificially low prices to bail out the
bullion banks in New York and London, or more
accurately DeutscheBank. The IMF plays a key role,
as its constituent members sell the public vaults
replete with gold, to a 'club' of developed western
nations. The incestuous private supra-national transactions
aid, abet, and conduct crony capitalist banking
fraud that involves the secretive sale of publicly
owned gold assets at artificially low prices for
the benefit of a handful of state sponsored syndicate
banks. The BIS arranged sale of gold smells
to high heaven and reveals a 'Smoking Gun' for the
central banks.

◄$$$ THE BIG B.I.S. GOLD SWAP HAS BEEN AVERTING
A DEFAULT OR SOME OTHER HORRIBLE EVENT. THE TRIPWIRE
EVENT IS A MOVE TO $1300 IN THE GOLD PRICE. THE
CREDIBILITY AND FAITH IN THE USFED HAS SLOWLY VANISHED.
BEWARE OF GRESHAM'S LAW, WHERE BAD MONEY PUSHES OUT GOOD MONEY. $$$

Gold investor and respected analyst John Brimelow
reported, "The news of the day, of course,
was the discovery by the Virtual Metals analyst
(Matthew Turner) that the BIS engaged in what appears
to have been the biggest Gold Swap in history prior
to the end of their fiscal yearend on March 31st."
The Bullion Desk broke the story. They reported,
"In its 2010 annual report, the BIS said
that 'Gold, which the bank held in connection
with Gold Swap operations, under which the bank
exchanges currencies for physical gold,' stands
at 8160.1 million in Special Drawing Rights [basket
currency], equivalent to 346 tonnes this year, up
from nil in 2009. While the data is relevant to
the end of BIS 2010 financial year in March, data
posted to the Intl Monetary Fund and carried by
Bloomberg show the swap still growing in April,
analyst Andy Smith of Bache Commodities noted. To
now, this implies a swap of about 380 tonnes from
the end of 2009, he said in a report."

The New Washington Agreement permits signatories to engage in gold derivative
transactions for the first time in a decade, thus
opening the door to abuse. The accord went into
effect at the end of last September. This in effect
means the end of central bank gold selling restraint,
at a time when several member banks are in desperate
condition. Governments continue to provide political
cover to support the banks for the good of the people,
from whom they have ransacked billion$ in gold for
the benefit of the elite. The timing of the IMF
and BIS actions to engage in a high volume set of
Gold Swaps at this particular time testifies to
the gold price pressures, but also hidden pressures
of a bank run. The price has threatened to breach
the $1250 mark convincingly several times. At the
same time, other physical pressures have built.
According to the COMEX daily data, an extraordinary
number of contracts have been standing ready for
delivery in silver & gold. Internal experts
believe a powerful rally would have demanded almost
two million ounces of gold to be transferred out
of the COMEX, a call on their 2.64 million ounces
of dealer supply. Such a run could have broken the
bank and caused a crisis with full publicity. Volcker
and Greenspan have warned on numerous occasions
that the central banks stand ready to sell gold
into the market to prevent its price from rising,
an event which would ruin financial market confidence,
and undermine the ability of the central banks to
manage their currency markets.

Fear, distrust, and disrespect have entered the
marbled buildings operated by central banks. The
worst fears of the US Federal Reserve are coming
true. As the central bank franchise system has failed
before our eyes, the recognition of its failure
is slowly creeping into the public consciousness,
and its corruption is observed more plainly. The
collusion with Wall Street, obstruction of disclosure,
and refusal to permit independent audits have had
an abrasive if not corrosive effect. The people
of the United
States are fast losing confidence
in the USFed and USDept Treasury for reckless policy
and wretched management of the banking crisis.
Beware of Gresham's Law, a hallmark marquee quotation on the Golden Jackass website.
Bad money drives out good money. In other words,
gold will be tucked away, sequestered, hidden, kept
out of reach, as tainted, phony, corrupted money
takes over in wide circulation, wide investment,
wide trading, and most importantly widely held bank
reserves. See the USDollar and the USTreasury Bond,
even the USAgency Mortgage Bond backed by the USDept
Treasury. The global reserve currency is contaminated
by a gigantic bond bubble in USTreasurys. The Gresham
effect is at work in climax style here and now!!
Its next manifestation is a monetary crisis with
USDollar epicenter, and hyper-inflation. See the
Cafe Americain article (CLICK HERE).

◄$$$ THE BIG B.I.S. GOLD SWAP CONTRACTS WERE
PROBABLY DESIGNED TO BAIL OUT A MAJOR BULLION BANK
ON THE VERGE OF A HIGH PROFILE DEFAULT EVENT. JULIAN
PHILLIPS REVEALS A LIE, AS NO PRIVATE BANK HAS THE
STATED VOLUME OF GOLD. THINK SEVERAL PRIVATE BANKS,
AND AT LEAST ONE SMALLER CENTRAL BANK. $$$

The story actually shifted. What began as a Wall
Street Journal story was updated and corrected.
An emailed statement from the BIS clarified that
the Gold Swap contracts were with commercial banks,
not central banks as was first reported. Adrian
Douglas of GATA added his viewpoint. He said, "As
always, news of anything to do with the gold market
is cloaked in secrecy, misinformation, and innuendo.
What we can be sure of is that the BIS news is
gold friendly. Why? Because the BIS was intending
to keep the matter secret. The BIS Gold Swaps
were not announced but instead 'discovered' by an
analyst snooping around the BIS accounts.
Similarly the International Monetary Fund has been
quietly selling gold each month since February,
even though for years every possibility of a gold
sale by the IMF was announced [a great many times.]"

Julian Phillips adds his viewpoint. He said, "Gold
Swaps are usually undertaken when the cash taking
central bank may want foreign exchange but does
not wish to sell outright its gold holdings. The
Wall Street Journal informs us that the Bank For
International Settlements did these swaps with commercial
banks. We know of no commercial bank that has
382 tonnes of gold on their books. It is likely
then that should these commercial banks have been
in the deal, they would have been acting for a central
bank [or several over time] who wished to remain
anonymous."Phillips reveals
the lie. It was a central bank in trouble, or a
group of private banks, and at least one smaller
central bank!!

One can easily interpret the sequence to reveal
three important facts:

central banks are short on gold bullion

central banks are unwilling to give up what
they have as a core hoard

central banks can no longer provide critical
assistance to the struggling bullion banks.

◄$$$ PORTUGAL
MIGHT BE UNDER GREAT DISTRESS AS THE NEXT P.I.G.S.
NATION TO TOPPLE. THE B.I.S. GOLD SWAP COINCIDENTALLY
HAPPENS TO BE OF THE SAME SIZE AS THE PORTUGAL CENTRAL
BANK GOLD HOLDINGS. THE BIG GOLD SWAP MEANS EUROPE
IS IN DEEP TROUBLE AGAIN, FROM A BANK RESERVES STANDPOINT.
$$$

Mike Kosares of USAGold puts the pieces of the
puzzle together with adept skill. He manages the
Centennial Precious Metals in Denver
and hosts its Internet forum. Kosares concludes
that the BIS Gold Swap contracts signify a threat
to Europe and its sovereign debt, and not to gold. This is not complicated,
unworthy of Sherlock Holmes detection and deductive
powers. Much is right out in the open. Coincidentally,
Portugal was listed as having 382 tonnes of gold
in reserve in its central bank vaults. A tad
of confusion has arisen since some reports cite
349 tonnes being the size of the BIS Gold Swap contracts.
Yet amount of gold inventoried by the BIS recently
for a swap deal was 380 tonnes. Kosares calls a
spade a spade. He described the swap agreement merely
as a sophisticated version of a pawn ticket. The
owner of the property leaves the valuable item with
the pawnbroker, in this case a very expensive piece
of bank jewelry, a bullion bar. The pawnbroker offers
cash in exchange, against the item's perceived value,
except only a tiny discount is suffered by the owner,
not the pawnbroker's typical 30%. If and when the
owner fails to reclaim the property with full payment
on the amount owed, the item changes ownership in
a transfer to the pawnbroker. In the case of the
BIS, the gold was left with the pawnbroker for cash
in Euros. The nation of Portugal is probably
involved in a direct deal to the BIS, which then
leased gold to numerous private bullion banks, maybe
even some smaller central banks, in complex three-way
deals.Portugal probably is not the party pawning the
national jewels at the BIS, even some have suggested
as such. The cobbling gradually of 380 tonnes from
smaller gold deals with commercial banks around
Europe might be smokescreen
cover, easily made from of the financial crisis.
However, Portugal has been identified as the next European
nations in deep financial trouble. Actually it is
a race between Portugal and Spain for the next crisis news focus of attention,
the disaster of the month.

Whether it is Portugal,
or some big private bullion bank (more likely) in
dire straits, on the verge of default, the point
is that gold is at the center of a potential
default event. The big need, or set of collective
needs, came from somewhere in Europe,
from a bank of some sort. On the other side is the
BIS, which issued the Gold Swap contract, not for
its health, not from altruism, but in direct response
to a great perceived need. The BIS wishes to preserve
the fiat currency system, broken bones and all,
twisted tendons and all, deformity and all. Some
central banks and bullion banks pawned their gold,
having exhausted their choices and options. Kosares
reminds that neither Portugal
nor Greece
is permitted to print money. The funds raised through
the Gold Swap contract could not go directly to
the federal government or to reinforce the bond
market. The overwhelming odds are that funds
went to bail out some major commercial banks, thus
preventing a sequence of counter-party meltdowns
and gross liquidations of European sovereign debt.
See the GATA article (CLICK HERE)
and the USA Gold Forum (CLICK HERE).

EUROPE AT GATE OF DEFAULT

◄$$$ THE LARGEST PRIVATE PORTUGUESE BANK
IS THREATENED WITH FAILURE. LEST ONE WORRY, THE
C.E.O. DENIED THE RUMORS. $$$

Rumors of persistent nature preview the coming
events. The head of the largest private Portuguese
bank struggled to deny bankruptcy rumors. An imminent
bankruptcy looms in Lisbon,
fueling further speculation. The head of Portugese
Banco Comercial Portugues, Carlos Santos Ferreira,
sent a message throughout the bank offices about
unscrupulous authors trying to undermine the confidence
of the bank, that any claims of being on the verge
of bankruptcy as groundless. The response maneuver
by Ferreira was intended to gain credibility, but
such gestures usually confirm the reality. Portguese
banks have been shut out of the interbank funding
market for months, relying exclusively on the Euro
Central Bank. Their bankruptcy could occur at the
stroke of a pen, or a lift of the telephone.

◄$$$ GREEK GOVT BONDS SHOULD LOSE 16% OF
VALUE IN AGREEMENTS. REGARD THE GESTURE AS A TRIAL
BALLOON, BUT ALSO AN INSULT TO MARKET MECHANISMS.
THE EUROPEAN BANKERS ARE ATTEMPTING TO GENERATE
SOME STABILITY THROUGH STEPS IN DEBT WRITEDOWN,
DONE THROUGH THE FORMAL BANK STRESS TESTS. THE CONCEPT
OF PICK & CHOOSE CANNOT SUCCEED WITHOUT MARKET
VALIDATION. THEN DEUTSCHE POST BANK WAS RUMORED
TO HAVE FAILED THE STRESS TEST. $$$

Rumors were used as a seeming policy device to
test the market reaction on European sovereign debt
writedown, not really to check the bank health.
The rumor was of a 16-17% Greek Govt Bond cut in
valuation. It sent the European stock market into
a strong rise. The leak was targeted on the discount
applied to Greek debt to be executed, as part of
the formal Bank Stress Test, by German bank sources.
The first trial balloon of a 10% discount on
Greek debt failed to produced the desired effect.
Its test failed, since the financial markets yawned.
A political selection process is underway, one that
seemed doomed since it defies market forces. The
supposed markdown applied to French Govt sovereign
bonds was to be only 0.7%, an amount that contradicts
any reasonable effect to come from the simple dynamic
that French banks own a large portion of Greek debt.
Then reports indicate that German sovereign bonds
are not to be stressed at all in the exercise, or
floating rumor mill. Bear in mind that the European
Union through its agent the Euro Central Bank, has
already gobbled up a massive amount of Greek bonds,
and almost no French bonds. The inconsistencies
and misalignment reveal the political side to the
process, certain to suffer a market contradiction.
See the Zero Hedge article (CLICK HERE).

More rumors were flying in the wind, that Deutsche
Post Bank needed a sizeable capital infusion to
appear solvent and pass the Stress Test. Despite
the rumor veracity, it confirms the Credit Suisse
announcement made earlier that banks from three
countries have failed the Stress Test. Compile the
list as Post Bank from Germany, along with Monte dei Paschi di Siena from Italy,
along with ATE, Piraeus, and
Helenic Postbank NBG from Greece.
The Credit Suisse analyst Daniel Davies assessed
that Post Bank would need 1.4 billion Euros in capital
to shore up to a 6% Tier 1 Capital. See the Zero
Hedge article (CLICK HERE).

◄$$$ A EUROPEAN UNION BREAKUP (DISMANTLE)
WOULD ENCOURAGE ECONOMIC GROWTH. ITS PRESERVATION
WOULD HELP THE BANKERS, BUT CONTINUE THE STIFLING
CONDITIONS BETTER CALLED CONSTIPATION. A BREAKUP
WOULD CLEAR THE LOGJAM, BUT IT CANNOT HAPPEN WITHOUT
SIGNIFICANT DEBT WRITEDOWNS AS PART OF A DEFAULT
PROCESS WITH DEBT RESTRUCTURE. POLITICS BLOCKS THE
EFFORTS TO REMOVE THE LOGJAM. $$$

A Capital Economics report out of London,
led by analyst Roger Bootle, came out boldly with
a conclusion. The report states that a European
Union breakup would unleash stronger economic growth.
The actual dissolution of the formal setup for the
16-nation EuroZone economic region would save the
region from years of economic stagnation by improving
the competitiveness of weaker members, while at
the same time lifting domestic demand in Germany, a necessary
ingredient to any European strength picture. The
report stated, "The threatened breakup of
the EuroZone, which many see as a potential disaster,
would actually open the door to renewed economic
growth, not just for weaker members of the zone,
but for Europe as a whole... [Return to former
domestic currencies] would offer them an escape
route from their difficulties through economic growth,
rather than depression." A breakup
would be a disaster to bankers. The London
firm believes the weaker economies of Europe face
years of economic pain, in their words, if they
continue on the path of reducing costs and prices
in order to regain competitive ness with Germany.
The entire extended pen of PIIGS nations, Portugal,
Italy,
Greece, Spain,
in addition to Ireland,
could quickly rebuild their competitiveness if they
returned to their own former currencies, which would
depreciate and thus spark export demand. This is
precisely the Hat Trick Letter plank for European
economic reform and recovery, stated consistently
for several months. The plan is obstructed by bankers.
The report made the conclusion that a full abandonment
of the Euro currency would assist Germany,
since a restored DeutscheMark would appreciate and
nudge their government expand domestic demand to
maintain jobs and growth. A re-energized import
trade into Germany
from other European nations would work to rebalance
the European economy. The German standard of living
would be preserved. Clearly, Germany would be forced to
deal with a headwind for growth and income. They
have proven in the past to deal with such challenges.
See the Bloomberg article (CLICK HERE).

◄$$$ THE GERMAN PLAN IS SOVEREIGN DEBT DEFAULT,
NOT BAILOUTS. GERMANY HAS ESTABLISHED THE RULES FOR BANKRUPTCY
IN ORDER TO ACHIEVE ORDER IN EUROPE.
THE TALK IS OF BAILOUTS IS INTENDED FOR POLITICAL
CALM. THE ACTION IS DEFAULTS, AS A NEW CURRENCY
SYSTEM IS THE REAL OBJECTIVE. THE INSINCERITY WAS
EXPECTED MONTHS AGO IN MY FORECASTS. IF ANY BAILOUT
OCCURRED, THE SOURCE OF FUNDS WAS THE USDOLLAR SWAP
FACILITY, NOT GERMAN BANKS. THE TRUE MOTIVE HAS
COME FORTH SLOWLY. $$$

The European Financial Stability Fund (EFSF) is
the platform upon which true motives are revealed.
The Der Spiegel article broke the story. They reported
a directional change in Germany
among its politicians and bankers, when actually
it was only a revelation of what has been the impetus
all along. The German plan is for sovereign debt
default, not bailout. The bailouts are accidents
unavoided on the political highway. The defaults
are inevitable blocked tunnels directly ahead, from
asset caveins amidst rampant debt destruction. The
consensus notions of EU national bailouts will turn
out to be a disappointment at best, and a ruse at
worst. My forecast since December has been that
Germany would talk about bailouts and grand aid
packages, but deliver next to nothing, relying upon
political landmines and high court decrees to de-rail
and disrupt any agreements forged from poor process.
Rumors have swirled in the market that the German
Finance Ministry has been working on a Plan B for
the EU bailout, gradually being revealed. The consensus
bailout notion expected the EFSF to be drawn upon.
Nations like Spain
would be unable to roll over their debt in refinance,
then turn to the big fund under the collective name
of the European Union as lender of last resort.
The rules of the EFSF are fluid enough to permit
the true motives to come forth, default. Maybe
default, restructure, then debt purchase at discount
is the ultimate plan, whose last step involves drawing
money from the big fund.

The German officials seem to have sloaly revealed
their hand, their plan, their motives. They are
pushing what amounts to a bank bailout/sovereign
default plan consistent with what took place in
Argentina, not at all a direct
blatant sovereign bailout. The end result, the
bottom line is to expect private deep debt writedowns
on assets held and deep debt discounts on assets
bought. Der Spiegel has suggested 50% as a point
of reference on writedown discount. The process,
a slightly different road, would leave the EFSF
to be used by various national countries to bail
out their own banks with exposures to the defaulting
nation. Details would be forthcoming from the
last line bankers, those who reside in Germany. Little has
been mentioned about the German electorate during
the Greek debt deliberations. They will find this
different road to be much more acceptable. The German
people are hard working, and would much rather offer
viable assistance to banks skewered by Greek debt
than to the Greek nation directly in deficit support
packages, but only after debt bonded security writedowns.
The cost is less too, as default involves writedowns
and thus less money in the packages themselves.
The brain trust behind the German position must
realize that without improved competitiveness, without
structural reform to change the path of red ink,
without more prudent budget allocation, the Greek
deficits will not improve. Continued aid without
profound reform and change would be tantamount to
a continued credit card allowed to a reckless child
still enjoying the good life without cares or responsibility.

Germany
is attempting to establish the rules for a rational
bankruptcy process, in order to achieve order in
Europe where little currently
prevails. The cost of bailouts is so huge, with
certain indelible marks coming to the taxpayer public.
The German Govt is working overtime to prepare a
set of insolvency rules for countries to operate
in the EuroZone. The rules would require private
investors to bear some of the financial burden,
namely to accept asset writedowns, and force the
affected countries to give up some sovereignty,
namely swallow budget cuts of some kind. The
plan is certain to face resistance, but reality
will force the issue. See the Der Spiegel article
(CLICK HERE).

◄$$$ RETAIL SALES IN ITALY
PLUNGE IN JULY, FOR A HOST OF REASONS. ITALY,
SPAIN,
AND PORTUGAL ARE SQUARELY IN THE
CROSSHAIRS OF BANK SYSTEM BREAKDOWN. THE ENTIRE
SET OF P.I.G.S. IS THE TARGET OF ECONOMIC RUIN.
$$$

Retail sales at the margin in Italy
are dominated by clothing and fashion generally.
Numerous factors conspire to wreck the Italian Economy.
The pundits put blame on lack of confidence. The
nation of Italy has not been the beneficiary of steady bailouts,
stimulus, and nationalization programs. A powerful
decline in end demand has been seen. It is gaining
momentum on the downside. Sales comparisons are
miserable, year over year. Summer sales receipts
are tracking at a 5% decline across the board, not
seen in decades. A strange but very real factor
is blamed for poor sales. The lousy performance
by the Italian football (soccer) team at the World
Cup has left a glut of jerseys unsold. Italy won the last World Cup
four years ago. High end Prada and Gucci brands
are offering deep discounts to entice shoppers into
the stores. Premium products go wanting. The lesson
learned will probably be ignored. The USEconomy,
absent its usual crutch of stimulus and tax breaks,
will struggle to walk upright without faltering.
Italy
offers a glimpse of what comes to the US
without stimulus.

◄$$$ SPANISH BANKS CONTINUE TO BE SHUT OUT
OF CREDIT MARKETS, AS THE EURO CENTRAL BANKS EXCLUSIVELY
FUNDS THE NATION. PARALYSIS IDENTIFIED A MONTH AGO
CONTINUES. PUBLIC BOND SALES HAVE HALTED. A LIFELINE
EXISTS TO THE EUROPEAN CENTRAL BANK. THE CRISIS
IN SPAIN
IS FAST REACHING A SYSTEMIC BREAKDOWN POINT. $$$

Spanish banks borrowed a record 126 billion Euros
from the European Central Bank in June. No government
bond sales had taken place in May or June, a funding
standstill. The credit market in Spain is locked and frozen
in insolvency bound in distrust. Spanish banks
borrowed a record 126.3 billion Euros (=US$161 billion)
from the EuroCB in June, to make a 48% jump from
the 85.6 billion Euros borrowed in May. Funding
and liquidity conditions in Europe
are nowhere near normal. The EuroCB has turned
into a Spanish central bank surrogate, a situation
that will not last long. Bond investors are
on strike while the bond issuers do not dare risk
a total failure in public view for auction. Investors
in Spanish debt are openly worried about the lack
of reform and the nation's ability to restore fiscal
discipline, as their huge deficit acts like an open
wound to the economy. The spread on 10-year Spanish
Govt debt has tripled to 200 basis points (=2.0%)
since January, versus the benchmark German Bund.
The problem is more basic when viewed from a bond
market perspective. Bond investors demand a much
higher bond yield, in the face of acute risk, from
both rising deficits and persistent economic recession.
The bond issuers require reasonable prices to offer
in bond sales, or else the deficits accelerate from
the borrowing costs as well. The pressure on Spanish
banks will continue to worsen. Conditions are not
conducive to agreements at the micro level. Just
as with the US
banks and the USFed, the central bank has stepped
in to act as the banking system itself, and the
bond market in surrogate. Dependence upon the EuroCB
has amplified greatly to total.

Banks across the continent have suffered great
damage to balance sheets and solvency, as a result
of bond losses to sovereign debt from bonds of Spain, Greece,
and Portugal.
The European banks have had to deal with losses
totaling 438 billion Euros in writedowns since the
credit crisis was triggered. Like the United States, these bank losses are small compared
to equity loss in property across Europe.
More big bank losses are coming, well over $2 trillion.
The national deficits add to the stress. Bond issuance
atop past losses has resulted in a funding standstill,
a lockout. So far to date, the Spanish Govt plan
to use the Fund for Ordered Bank Restructuring (FROB)
has been very slow out of the gate, and might be
a failure in its infancy. The fund has raised 9
billion Euros from the government and sold 3 billion
Euros worth of bonds so far, according to Bank of
America data. One can conclude that the Southern Europe rim is insolvent, has no access to capital markets,
and would collapse without the EuroCB last resort.
The situation cannot last much longer without extreme
crisis events. The Stress Tests, if run fairly,
will only add to the crisis. If run dishonestly,
like the Americans did, then the false facade might
buy a few months. In the US, the entire system is
so thoroughly corrupted that perceptions matter
little, as brute force of monetary inflation, bond
monetization, and USFed largesse permit the system
to continue. The US
has become overrun by Bank Zombies within an Economic
Zombie. The nations of Southern Europe are on the same Zombie path.

◄$$$ HUNGARY
CONTINUES TO TEETER. NEGOTIATIONS TO RESCUE HAVE
BEEN ABANDONED AFTER AN IMPASSE THAT INCLUDED ADMISSION
OF MORE LIES ON BUDGET DEFICITS. NATIONAL GOVTS
ARE NO MORE HONEST THAN WALL
STREET AND LONDON
BANKERS. THIS IS GREECE
REVISITED, WHILE SPAIN
IS GREECE TIMES SEVEN. $$$

The Hungarian Govt Bond is set for a strong decline
after the IMF and EU abandoned negotiations for
financial rescue. The Intl Monetary Fund and
European Union ended formal talks without endorsing
Prime Minister Viktor Orban's plans to control the
budget deficit. The IMF is on the hook for most
of the 20 billion Euro emergency loan to Hungary under a 2008 accord.
The EU predator banks harp on how Hungary
must make difficult decisions on spending, the same
tough choices that WashingtonDC and London
refuse to make. The cushion to support Eastern
Europe that comes one layer above governments is
surprisingly thin. The Hungarian Forint currency
is doing poorly, having lost 6.5% against the Euro
in the past three months, the worst performance
among the more than 170 currencies tracked by Bloomberg.
The Forint currency serves as a visible battleground.
The yield on the benchmark 3-year Govt Bond rose
a whopping 153 basis points to 6.93% on July 16th,
a single day. Deception ruled. The Orban landslide
victory in April came after by pledging to end the
massive budget cuts from previous years ordered
by rival leaders. The Hungarian deficit was cut
to 3.8% of GDP in 2008 from 9.3% in 2006. With the
glow of the election worn off, Fidesz said the previous
administration lied about the budget as Orban lobbied
the IMF and EU to allow wider deficits this year
and next. Officials from the Hungarian Civic Union
political party Fidesz disrupted financial markets
in early June, when its leaders admitted the economy
was much worse than the portrayed, leaving the country
with a slim chance to avoid a Greek situation, in
their words.

The Hungarian Govt tried to persuade the IMF to
accept a deficit target of as much as 3.8% of GDP
for 2011 instead of the 2.8% demanded, according
to Economy Minister Gyorgy Matolcsy. The United States maintains a
deficit 10% of GDP, and that does not count the
costs from the endless sacred narcotics war being
waged. Sense the double standard!! Budapest wished to secure a 2-year bridge loan
agreement for as much as 20 billion Euros beginning
in 2011, said Matolcsy. He made a public statement
that read, "During the talks with the IMF
and EU delegations, the Hungarian Govt openly and
honestly revealed the problems stemming from the
misguided budget management in the first half. The
government will naturally continue negotiations
with international organizations, including the
IMF and the EU." The door remains open
for continued talks, but a wide rift has opened.
This is Greece
all over again, in a nation not vital to the European
power center. Gergely Suppan is an economist at
Takarekbank Zrt in Budapest. He said, "The statements suggest that the parties
did not turn hostile. The IMF probably wanted to
see the basis of the 2011 budget, and the government
could not show specifics." The impasse
will force movement. See the Bloomberg article (CLICK
HERE).

CHINESE ENIGMA
TURNS A CORNER

◄$$$ CHINESE TRADE FIGURES SHOW THAT MARCH
WAS A STATISTICAL ANOMALY (FLUKE). THE CAPITAL DRAIN
CONTINUES FROM THE UNITED STATES AND EUROPE TO CHINA IN A BIG WAY STILL. INTERNAL BUBBLE EFFECTS
TO CHINA
HAVE NOT HAMPERED ITS EXPORT TRADE, WHICH IS DEPENEDENT
UPON FOREIGN ECONOMIC HEALTH. $$$

What was seen as a warning bell in March has passed.
The first trade deficit for China in many years of $7.2 billion logged in
March is proving to be a fluke, an anomaly of some
sort, as a fresh surplus was registered. The
Chinese export juggernaut continues with momentum
and durability. The Chinese General Customs Admin
released the June trade data. The nationwide
June trade surplus came in at $20.0 billion, as
imports were flat, but exports grew strongly.
The outcome seems unaffected by Yuan currency decisions
and by vapid cheery empty words by American and
European politicians on the desire to stimulate
their exports. The intractible difference, as stated
for six years in the Hat Trick Letter, has been
and continues to be the gross differential in labor
wages between China
and the West. When 10-fold different or only 5-fold
different, the wage imbalance drives the process.
Imports jumped by a huge $32 billion in March, but
have steadily risen between $120 and $140 billion
since then. Fiscal stimulus abroad, Yuan currency
revaluation at home, and dirt cheap shipping costs
(see the Baltic Dry Index) have combined to lift
US and Europe exports to multi-year
records. Exports to the EU hit $27.2 billion, the
highest since the summer of 2008. Exports to the
US hit a record $25.5 billion. USCongressional
leaders hellbent on trade sanctions against China, like Senator Schumer,
will be further motivated to rattle the sabres for
sanctions that stick, a destructive step but loaded
with political appeal. See the total Chinese data
with net trade balance. Note the left scale pertains
to import and export, the right scale to the net
difference (solid line).

Observe the monthly trade details with the United States and European Union. The US
net imbalance tipped above $18.0 billion. Records
were set bilaterally on Chinese exports to the US
and the net surplus to the US.
The Obama Export Commission is not succeeding with
their tasked mission. Exports from China
to Europe are pushing the record level. Given the stronger trending imports
to China
from Europe, probably the result of more US trade friction, the EU surplus is $3 billion
below record level.

A Chinese analyst working out of Hong
Kong expects June to be an anomaly month, as structural
changes are in the process. Shen Jianguang is an
economist at Mizuho Securities Asia, who warns,
"Exports may see a sharp deceleration after
July as demand in Europe and the US weakens and a stronger Chinese currency, higher
wages, and reduced export tax rebates erode the
competitiveness of Chinese goods. The government
may have to intensify efforts to boost the domestic
economy as they have limited control over external
demand." The Obama Admin has set a stake
in the ground, with a goal of doubling exports in
five years. The start out of the gate is miserable.
The United States must address overhead costs, regulatory
burdens typical of other socialists, and basics
such as labor force skills.Europe
suffers from currency instability, sovereign debt
rejections, and fiscal budget austerity, which are
certain to undermine demand. The significant decline
in shipping costs, evident in the Baltic Dry index,
reflect poor economic conditions and weak demand.
Some analysts regard the June figure to be a culmination
of all monetary and fiscal measures, which are not
to be monthly effects.

◄$$$ CHINESE PROPERTY PRICES ARE DUE TO DECLINE
30%, NO IFS ANDS OR BUTS. VACANCY AND HALTED BIDS
ENSURE THE DECLINE. CHINA HAS A MUCH BIGGER PROPERTY BUBBLE THAN THE
UNITED STATES, AS THEY CONCEAL THEIR ACTUAL CREDIT
VOLUME. THE CHINESE GOVT IS FORCING A REDUCTION
IN CREDIT AND TIGHTENING OF LENDING, AS WELL AS
SPECULATION. BUMPS, BUSTS, AND ENTITY FAILURES COME.
THEIR RESERVES WILL BE CALLED UPON TO PAVE OVER
THE MESS. $$$

The bank Standard Chartered forecasts a 30% broad
property decline in China urban areas, where overdone
construction took place that kept the workforce
occupied. Next comes payback. The forecast was directed
to property prices in Beijing,
Shanghai, Shenzen, and other
large cities in China. Higher supply is meeting
lower demand. Monetary tightening has begun to hit
and be felt. A glut of newly built homes has
encoutered buyers who are restrained by higher down
payment rules and curbs on speculation, as the industry
faces a proposed property tax. The central bank
has told bank lenders to set aside greater reserves,
and targeted a 22% cut in credit growth at banks
this year.China's property market is beginning a collapse
stage that will render damage to the nation's banking
system, said Kenneth Rogoff. He is the Harvard University professor and former chief economist of the Intl Monetary
Fund. Witness a big bump in the road of industrialization.
Chinese authorities intensified a crackdown on property
speculation after announcing the economy expanded
at a torrid 11.9% annual pace in the first quarter,
the most since 2007. Even if three quarters of that,
such a pace is still torrid.

Rogoff summarized his view, saying "You
are starting to see that collapse in property and
it is going to hit the banking system. They have
a lot of tools and some very competent management,
but it is not easy. The bad news is the recoveries
are very slow. The fact that we are not growing
super fast does not necessarily say, well therefore
we are about to enter something worse. [In the aftermath
of a financial crisis] you do not get a typical
recovery with a V-shaped [trajectory]."
Although Rogoff makes sense, he reveals the shallow
depth of economist intellect and minimal grasp of
the full nature of structural problems, based in
phony money and unchecked debt growth. Rogoffs
view clashes with that of Stephen Roach from Morgan
Stanley Asia, who in June stated his belief that
the property boom in China is not a bubble. He
points to portions of the market such as high end
apartments that are overheating, but expects residential
demand will remain robust as rural Chinese migrate
to cities. Roach seems delusional, unaware or
in denial of a vast vacancy scourge in Beijing that approaches 50%, a problem affecting other large cities
after a construction craze that has yet to fully
die down. Roach is way off and losing his once
excellent touch. Peasants entering the cities will
come with empty pockets, he must be aware. China's
five largest state controlled banks plan to raise
as much as $54.5 billion of capital by selling bonds
and shares after they extended record loans last
year to support a Chinese Govt stimulus plan. See
the Bloomberg article (CLICK HERE)
and the Business Insider article (CLICK HERE).

When China
shared a US monetary policy with a
tight peg (same interest rate and forbidden currency
shifts), then shared the policy with a looser peg,
they shared the outcome of asset bubbles and busts,
the bubblicious outcomes. Take two stunning information
items about the Chinese property market. The debt
ratings agency Fitch has revealed that China
has been badly under-representing the volume of
new loans in 1Q2010, using the same hidden type
of securitization deals as the United States. Fitch estimates that the net
amount of new Yuan-based loans extended in the first
half of 2010 was closer to Yuan 5.9 trillion, or
28% above the official figure of Yuan 4.6 trillion.
Like the US, credit volume has shifted off balance sheets.
Like the US,
credit activity is concentrated among just a few
dozen banks. China is remarkably similar to the United States in bank behavior
generally. Then came a recent article in South
China Morning Post, in which an economist at the
Chinese Academy of Social Sciences noted an estimated 64.5 million empty apartments
and houses in urban areas of the country! His
method was clever and simple, using electricity
meter readings. This tally is five times larger
than the 12 million in total US home inventory that includes the banks and
shadow inventory of foreclosed homes. China
is quietly funding and creating a housing bubble
in hidden fashion that is five times bigger than
the one that busted in the United States, taken down the banking sector and
USEconomy in the process. See the Zero Hedge article
(CLICK HERE).

USTREASURY FRAUD
& UK ACCOMPLICE

◄$$$ CHINA
DOWNGRADED THE USGOVT DEBT FROM TIPTOP 'AAA' TO
ONE LEVEL LOWER. IN A TRADE WAR ESCALATION, THE
CHINESE DAGONG CREDIT AGENCY TOOK BOLD ACTION AS
IT DOWNGRADED A RAFT OF WESTERN DEBT. IN TWO YEARS
THEIR MOVE WILL SEEM BRILLIANT. NOTICE THE CHINESE
MISDIRECTION. DELUSION, COMPROMISE, AND CORRUPTION
STILL RULES OVER WESTERN DEBT RATING AGENCIES. $$$

The Currency Wars saw a big dose of lighter fuel
tossed on the fire last week when US sovereign debt suffered a downgrade at the hands
of China's
Dagong Credit Rating Agency. Consider it a trade
war escalation with a surgical strike. Dagong pushed
USTreasurys down from number one in the world, to
a distant thirteenth place. The Chinese rating agency
in a stroke stripped Western nations of AAA status,
since the US debt rating agencies ignore the obvious credit
risks. China's
leading credit rating agency has stripped the United
States, the United
Kingdom, Germany,
and France of their AAA
ratings, accusing Anglo-Saxon rating competitors
of ideological bias in favor of the West. The
Dagong agency used its first splash into sovereign
debt to establish a bold standard of creditworthiness
around the world, giving much greater weight to
wealth creating capacity and foreign reserves than
Fitch, Standard & Poors, or Moodys. They
also pay attention to rapidly escalating debt levels.
The move makes perfect sense.

The Chinese Govt is well-known to act in a subtle
manner. Lately, they have been using misdirection
as well as bold actions. The Western debt downgrade
by Dagong was bold. More devious has been the gradual
sale at the margin of USTreasurys by China,
while maintaining a high level still in reserves.
The total USTreasurys owned in combined terms
by China and Hong Kong changed
little in almost the last year. In July 2009, the
total was $1.051 trillion. In April 2010, the needle
showed $1.052 trillion, a flat trend. The Chinese
have wisely chosen to manage their US debt risk by stemming incremental purchases
while shifting away from short-term USTBills. The
misdirection came before the halt in US$-based bonds.
In February 2009, director general Luo Ping of the
China Banking Regulatory Commission said rather
deceitfully, "Except for USTreasurys, what
can you hold? Gold? You do not hold Japanese government
bonds or UK bonds. USTreasurys are the safe haven. For
everyone, including China,
it is the only option." Yeah, right!! Clearly,
Ping wanted US leaders and
other foreigners to fall for his false line. China was selling large portions
of its USTreasury portfolio, and wanted to preserve
their value. Ping also deceived the US leaders on their gold plans.
In the months following Ping's speech, China doubled its gold holdings.

The latest volley is the Dagong Global Credit Rating
downgrade of USTreasury debt from AAA to AA with
a negative outlook. In doing so, they rate Chinese
sovereign debt a nick higher than American sovereign
debt. The Western press is free to denigrate the
move. The Financial Times immediately insinuated
the privately owned Dagong is a tool of the Chinese
Govt, and claimed in pathetic feeble fashion that
ratings by Standard & Poors, Moodys, and Fitch
are still more likely to be trusted. Mere words
without substance. The US credit agencies, as a group,
are tools for Wall Street, exploited to the hilt,
steeped in collusion, while Wall Street controls
the USGovt finance ministries. Hypocrisy again.
China
has downgraded US
debt and has stopped increasing its USTreasury holdings.
See the Cafe Americain article (CLICK HERE)
and the UK Telegraph article (CLICK HERE).

◄$$$ CHINA
USAGE OF US$-BASED DEBT AS THREAT IS A FRONT BURNER
TOPIC. THE CHINA DENIAL CARRIES NO WEIGHT,
LIKE A GOLDMAN SACHS RECOMMENDATION OR A USGOVT
REPORT ON INFLATION. CHINA
SAYS IT WILL NOT USE USTREASURYS AS THREAT. OF COURSE
THEY WILL. THEY IMPLICITLY WARN TO WITHDRAW STIMULUS
AND MANAGE THE MONETARY GROWTH THAT UNDERMINES THE
USDOLLAR. THE CHINESE ARE LYING ABOUT RESERVES MANAGEMENT
AGAIN, HAVING LEARNED FROM THEIR ANGLO DEBTORS.
$$$

China's State Administration of Foreign Exchange
(SAFE ) has begun a publicity campaign, probably
to raise attention to how vulnerable the USGovt
is, surely with motive the opposite of any promise
not to use a financial weapon of mass destruction.
The destruction would also be of their own reserve
accounts, of which sovereign wealth funds play a
key role. SAFE officials tried to ease concerns,
promising it would never wield its holdings of USGovt
debt as a weapon. They strive for clarity about
management of China's $2.5 trillion in FOREX
reserves, the world's largest. It contains $868
billion in USTreasurys at last count. The growing
fear is that, in anger over trade friction, or in
disgust over horrible USDollar management, or with
ambition to displace the US from its catbird seat, China could dump
a truckload of USTBonds every day for a 90-day period
and accumulate gold with the proceeds, and thus
cause a global panic, centered upon a USDollar monetary
crisis. The focus should be squarely on
China, not Russia, in financial war games. The Chinese Govt
denies the intention to use USTBonds as a weapon,
which is tantamount to admitting the threat is real,
often called the 'Nuclear Option' aptly. Its mere
mention serves as a threat! The dumping of US$-based
assets has become a front burner issue, since the
USTreasury bubble has emerged as of the autumn 2008
collapse of the US financial sector. In building
a gigantic debt burden, THE UNITED STATES
HAS FORFEITED ITS SOVEREIGNTY, and made
itself vulnerable to creditors who have never been
allies in a century. The next chapter has been played
out 100 times, but never against the United
States.

The publicity by the SAFE fund of the risk, the
weapon, the option, the denial, serves as a reminder
that the nuclear option not only exists but is certainly
at the forefront of any diplomatic negotiations
with the United States. The USGovt
acts as though it still commands the global catbird
seat, while its vulnerabilities are every bit as
great as Greece, surely worse. Foreigners play along, not
at all amused. The SAFE official position is laughably
dishonest. It reads, "SAFE is lukewarm about
gold as an investment. It cannot become a main channel
for investing our foreign exchange reserves. The
size of the gold market was limited and prices were
volatile. Buying more gold would also not help much
in diversifying China's
reserves." Of course, all the above is
patently untrue, mere sides of a blunt instrument
forged as a modern weapon. One can deduce that
the Chinese Govt has issued warning not to embark
on another powerful round of Quantitative Easing.
Imagine a villain putting a big sharp serrated knife
to a man's throat up against the wall, and saying
"I will never use this big powerful knife
with my capable strong arm on your arrogant neck,
where your bulging carotid artery is more exposed
every month!" Of course, it is a threat,
in the middle of a growing trade war that the Hat
Trick Letter forecasted back in 2004 and 2005, back
when partnership was the stupid chorus line by clueless
American economists and nitwit USGovt
officials. Partners turned to rivals as predicted,
then to enemies as predicted. Economists are as
stupid and badly trained as they are self-deceptive
and compromised, my usual
refrain in harangue.

The Chinese have their own bond problems. Their
7-day and 30-day repo markets suffer from great
strain on an increasing basis. The presence of large
amounts of gold in reserve would certainly allay
fears that domestic banks have something beyond
massively underwater residential loans on their
balance sheets to fund trillion$ in liabilities.
The Chinese statement warns the arrrogant USGovt
officials who are hellbent in hurtling over the
fiscal cliff, but face the road to ruin anyway,
from massive irresponsible over-spending and massive
reckless money printing. Not if, but when USFed
Chairman Bernanke hits the switch and sends the
Printing Pre$$ into turbo-charge mode once more,
the Chinese Govt will in some highly visible way
abandon support for US$-based assets. They can disable
the USEconomy. They acknowledged that financial
markets were very concerned that massive USGovt
borrowing.

The SAFE fund position can be summarized using
their own words. Most is bland boilerplate verbage,
general and harmless. They wrote, "Any increase
or decrease in our holdings of USTreasurys is a
normal investment operation. The USTreasury market
is the world's largest government bond market, and
USTreasury bonds deliver fair good security, liquidity,
and market depth with low transaction costs. The
USTreasury market is a very important market for
China.
We must recognize that any depreciation of the dollar
is relative to other countries, and other countries
or regions also have this or that problem. SAFE
will never be a speculator. It mainly seeks to protect
the safety of China's FX reserves
and ensure a stable investment return."
Between the lines is a veiled message of how important
their FX reserves are, and preservation of value
is of paramount importance. Their line about
universally shared problems is an implicit endorsement
of gold. SAFE called on the United
States and other major countries
to take responsible measures (in their words) that
maintain the US$
valuation. One should hear this as a loud warning
to withdraw monetary stimulus in a reasonable manner
and to rely less on deficit spending. The Chinese
wish to avoid a loss in their savings. They claim
the USDollar decline represents no clear threat
for real reserves loss to China,
but that is plainly untrue. They are lying, just
as the USGovt lies. The battle is on with liars
on both sides, except one side is the deep debtor
and the other is the deep creditor. One can be sure
they both do the exact opposite of what they say.
See the Bloomberg article (CLICK HERE).

◄$$$ USGOVT DEBT ISSUANCE EXCEEDS EVEN THE
GARGANTUAN USGOVT DEFICITS. THE GAP IS $1.5 TRILLION
OVER FOUR YEARS. ONE COULD GUESS THAT WALL STREET IS SELLING BONDS AND SQUIRRELING THE MONEY IN FOREIGN BANKS,
A BASIC COUNTERFEIT IN A SYNDICATE OPERATION. THE
OPERATION MIGHT BRING NEW MEANING TO MONETIZATION.
$$$

Under Goldman Sachs rule, the USDept Treasury is
running some bold kind of counterfeit game, whose
purpose is unclear. The USGovt borrowing through
debt issuance was $142 billion more than the June
USGovt federal deficit, which means they are doing
more than financing the deficit. THEY ARE FUNDING
A SYNDICATE! In chronic fashion, excess issuance
has been the pattern, as the USGovt has issued $1.5
trillion more in debt securities than its budget
deficit in the past four years. During the past
45 months, the USGovt has accumulated an incremental
$4.7 trillion in new debt, but the federal budget
deficit has grown by $3.2 trillion, much less but
still a mammoth amount. Nobody asked why so,
and nobody asks where the bond proceeds go. One
is left to speculate that a vast bold new syndicate
technique is simply selling bonds beyond newly formed
debt, stealing the funds as proceeds, and tucking
the bonds in foreign locations for syndicate usage.

The June USGovt official budget deficit was logged
at $68.4 billion. During the same month, the USGovt
borrowed a staggering total of $210.9 billion. These
are not refinances of USTreasury debt in rollover.
On a consistent basis, the USGovt has borrowed much
more in each deficit month than was required to
close the deficit and finance the debt accrued.
The differential of excess debt issuance for
the first six months of 2010 comes to a hefty $290
billion, a pattern in continuance. Perhaps the
US syndicate maestros figure
that with large numbers, nobody will notice, or
given the hidden monetization, they might as well
put the presses in hyper-drive. The cumulative data,
as well as the mindboggling differential (dotted
line) between the two series is shown on the attached
chart. Perhaps it is for war funding far in excess
of the stated costs, to save embarrassment and questions.
Perhaps it is for enormous vertically integrated
business investment in Afghanistan for processing
of poppy into heroin, or heavy extra distribution
costs, or for elimination costs to competitors.
Perhaps it is for the heavily rumored underground
cities under construction for elite resident purposes.
Perhaps it is extra costs for secretive new military
bases scattered like a cancer across the globe.
Perhaps the answer is simpler, in that it is just
being counterfeited and stolen by the financial
syndicate led by Goldman Sachs that controls the
USGovt financial ministries, and operates criminally
with full impunity (except for meager fines). My
sincere belief is that all the above are part of
the destinations for the money.

◄$$$ JIM ROGERS HATES USTREASURY BONDS AND
LOVES GOLD. HE SPEAKS IN PLAIN WORDS, WITHOUT PREFACE,
WITHOUT CONFUSION, AND WITH NOTABLE CONSISTENCY.
$$$

Popular and successful independet investor Jim
Roger urges to sell USTreasurys and to buy precious
metals. He also favors rice as a refuge investment,
as the global economy continues having problems.
At a conference in Kuala Lumpur, the maverick chairman of Rogers Holdings said, "Bonds
are not a good place to invest in. You should own
commodities because that is your only refuge."
He mentioned favorably both silver and rice. The
best place to be is in commodities and other natural
resources, including precious metals like silver,
platinum, and palladium. Commodities are strong
investments since supply shortages are already developing,
and stockpiles are accumulating from heavy demand
as a hedge against the persistent monetary problems
and sovereign debt rejections. In the last several
months, sovereign debt and currencies have been
in crisis mode. Gold prices will rise to more
than $2000 per ounce in time, said Rogers.

◄$$$ CHINESE DUMP USTREASURYS AND ENGLAND
ACCUMULATES THEM. OR MORE ACCURATELY, THE USFED
HIDES ITS VAST MONETIZATION EFFORTS IN THE U.K.
ACCOUNT. NO WAY IN HELL CAN BRITAIN PURCHASE $170
BILLION IN USTREASURYS IN FIVE MONTHS FROM LEGITIMATE
SOURCES OF SAVINGS!! THE ILLICIT PURCHASE AND ACCOUNTING
NEEDS PUBLICITY. $$$

In May 2010, China
reduced their USTreasury holdings by $32.5 billion,
now the lowest level since June 2009. China
shed $35.4 billion in short-term USTBills, offset
by a mere $2.9 billion in purchased USTBonds. Furthermore,
Japan
reduced by $8.8 billion in USTBonds. Even the OPEC
nations have cut down on such assets. However, buyers
could be found, all Anglo descent, at least on the
surface. The total foreign USTreasury holdings rose
from $3957 billion to $3964 billion. Attribute the
good tiding news to gigantic ongoing accumulation
by England, just like
the last several years. The UK-based buying is
highly suspicious, like a neighborhood crack house
purchasing a swimming pool, but arouses no attention
except by intrepid analysis on internet publications.
Even the usual suspect of Hedge Funds, whose registry
and tallies track to the Caribbean Banking Centers,
saw an increase from $151.8 billion to $165.5 billion
in a detour of the risk trade. Generally, the United
States financial system suffered a dramatic decline
in May as foreign purchases of US assets hit a wall,
falling from $110.3 billion to just $33 billion.
Even the more staid Corporate Bonds and Corporate
Stocks suffered net selloffs, for the first time
since February 2009. See the graph of steady Chinese
unloading of USTreasurys in the last several months.

As of end May, China still holds a gaggle of USTreasurys,
but their USTBill holdings are down to a trifling
$7 billion, the lowest level ever! If the USGovt
is making a maelstrom on the short end, then China will sell into the confusion, especially
at high principal prices tied to near 0% yields.
China is selling the bubble.
China
still commands the notorious position of possessing
the most USTreasurys at $867.7B worth, followed
by Japan
at a still robust $786.7B. Without any question
whatsoever, the USFed and USDept Treasury
are using the United
Kingdom as a ledger item for
their mammoth USTreasury monetization, all barely
hidden, with the TIC data used as a pathetic
fig leaf to obscure it. The story receives no mainstream
attention. The United
Kingdom has wrecked banks,
staggering deficits, no trade surplus, yet managed
to buy a whopping $28B of USTBonds in just the
month of May. Call their investments an exponentially
growing savings plan. At end 2009, as of the
December tally, the UK owned $180.3B in USTBonds, yet somehow managed
to accumulate in the new year, up to the current
$350.0B. THE UK
SUPPOSEDLY HAS ALMOST DOUBLED THEIR HOLDINGS IN
A MERE FIVE MONTHS!! That is wealth accumulation
to make Johann Gutenberg happy, inventor of the
printing press. Bear witness to the shadow USFed
debt monetization operation, operating out of the
United
Kingdom, or at least its accounting.
The hidden USTreasury Bonds reside in England. If truth be known,
this is where the owners of the USFed reside. Anyone
who accepts the following graph on its face is a
blatant moron, a bold huckster for Wall Street,
or a dimwitted employee of government. Review the
Treasury Investment Capital (TIC) report for details
on holdings for a list of nations, month by month
(CLICK HERE).
See the Zero Hedge article (CLICK HERE).

◄$$$ UKGOVT SPENDING CUTS RISE FROM 20% TO
40%. THE WORDS BANKRUPT, BROKEN, AND SYSTEMIC FAILURE
SEEM APPROPRIATE. BRITAIN COULD NOT COPE WITH AN EXTENDED EPISODE
IN THE CREDIT CRISIS, ACCORDING TO THE BANK FOR
INTL SETTLEMENTS. THIS IS THE NATION THAT GOBBLED
UP $170 BILLION IN USTBONDS FROM RIPE SAVINGS IN
FIVE MONTHS?? $$$

The Bank For Intl Settlements has warned that
sovereign debt under siege cannot adequate be relied
upon as the coupon for broad national financial
rescue and stimulus, not again, not in the next
round. Short messages deliver the most power.
The UKGovt is admitting openly that the situation
is worse than they said before. They will order
not 20% spending cuts, but 40% in such cuts. Newly
ordained Prime Minster David Cameron ordered the
officials to draw up 40% cuts, the biggest in history.
He has ordered cabinet ministers to draw up a Doomsday
budget whose essential service spending cuts could
see tens of thousands of policemen, teachers, and
other civil servants lose their jobs, including
garbage collection. These are integral telltale
steps in the ugly march to the Third World. See the UK Daily Mail article (CLICK HERE).
This desperate nation, this nation of a busted finance
sector, this nation whose economy is in a tailspin
without strong industry, this nation purchased $170
billion in USTreasury Bonds from its savings between
January and May 2010 !?!?!?

In the summer 2008 leading up the the Wall Street
death experience, the British suffered their own
shameful episode with Northern Rock, Royal Bank
of Scotland, even the venerable Lloyds of London
each succumbing, no longer on the lists of the living.
They are all broken, just as broken and insolvent
and wrecked as the biggest US
banks, all Zombies. In the last several months,
Britain has struggled to regain its balance, an
impossible task when recovery is not within grasp,
and the banks play accounting games to falsify their
moribund, even comotose condition. The global central
banker, the central bank for central banks, the
Bank For Intl Settlements has warned that Britain's mountain of debt
could leave the country powerless to respond with
another rescue initiative in the wake of a fresh
financial crisis. The BIS published the warning
in an annual report, painting a frightening picture
of the impact from a second banking emergency on
heavily indebted nations such as Britain. The Bank of England
Governor Mervyn King has estimated that the UKGovt
has pumped as much as one trillion Pounds of (phony)
money into the banking system, but he failed to
mention to total lack of effect for a revitalization
response. Billions of pounds were spent in nationalizing
the Royal Bank of Scotland (partial), Lloyds Banking Group (partial),
and Northern Rock (total) in an attempt to prevent
their collapse. They redeemed failure from a
real estate bust, which is the absolute opposite
of investment or stimulus. Special liquidity
measures just like with the US Federal Reserve propped
up other lenders and prevented the system from freezing
up. The ugly truth is that the UK
banking system is dead, but fakes lifelike movements.
It cannot sustain a lending role for its economy.

The BIS report warned that repeating these measures
could be impossible, since so stretched and insolvent.
The key is the market rejection of sovereign debt
itself in recent months, the primary instrument
of rescue and stimulus. The broken monetary system
has removed the primary instrument from which to
rescue and stimulate, the sovereign bonds. The
BIS report wote, "Events coming out of Greece
highlight the possibility that highly indebted governments
may not be able to act as a buyer of last resort
to save banks in a crisis. That is, in late 2008
and early 2009, governments provided the backstop
when banks began to fail. But if the debts of the
government itself become unmarketable, any future
bailout of the banking system would have to rely
on external help." Central bankers
fear Europe has suffered the
vanishing of external backstops with their own government
bonds. The same applies to the United
States, except the US hides with fig leaves its vast monetization.
What remains is pure debt monetization in the open
by USDollar printing, a ruinous display of monetary
expansion, which gold will notice and nobody can
deny.

The first gold-backed currency was announced last
week in Malaysia. It could be an initial
step to undercut the USDollar, but usage will determine
its effect. Regard it as another crack in the dollar
dike. As Tyler Durden said, "Slow incremental
acceptance of alternatives form in seemingly meaningless
areas of the world. Ranks break first where there
is little to lose by change, last in places that
cannot afford it." The Islamic Golden Dinar
has been mentioned in the Hat Trick Letter many
times, but a few years ago. Malaysia has been a weird corner of the world,
a minor Islamic hotbed, home of a radical sect.
Let's see if any bilateral trade with Arab nations
uses it. The problem with valid alternatives
is the effect of their success in isolation, not
globally. Any such alternative would quickly shoot
up in value relative to the current standard, wrecking
all banking and commerce that used it. The banks
would suffer losses from reserves NOT in its denomination.
Commerce would suffer from unstable price structure
tied to a rising currency. In other words,
it must be used globally and in unison, if it is
to succeed. Also, global usage is a requirement
to isolate the US
& UK, since broad acceptance would thrust the Anglos
into the Third World. Gold
creates losers when displacing a corrupt unsound
monetary system. The Malay initiative will not be
global or in unison. The opening line from the UK
Guardian author below displays pure ignorance. Paper
bills later would be backed by the coins. The currency
and coin is scheduled for usage locally in a northern
region. FMX Metals Connect published the following.

"Imagine a world trading solely in gold
and silver coins. Imagine the size of your wallet.
Yet this is the ideal world envisaged by some of
Malaysia's activists championing the Islamic Gold
Dinar and Silver Dirham as a new form of legal tender
to replace paper money, a utopia that could see
the light of day as early as the middle of next
month. This is when one such group, Muamalah
Council, plans to implement the dinar system in
Malaysia's northern state of Kelantan. If
information on its website is to be believed, the
council has the blessing of the state's Islamist
government, Parti Islam SeMalaysia (PAS), to kickstart
the dinar in three moves. First, the state will
pay a quarter of its public servant salaries using
the Dinar. Second, all state companies will accept
Dinar payments. Lastly, some 600 commercial enterprises
will also embrace this currency... What is perhaps
more striking is the UK connection to the increasingly
globalized Islamic Gold Dinar movement. The Indonesian
grouping is adhering to a fatwa issued by the South
African-based cleric Sheikh Abdalqadir as-Sufi,
a Muslim convert in Cape Town
formerly known as Ian Dallas of Scotland.
Then there is the Dinar Exchange, the British equivalent
of Indonesia's WIN. As the
[stated] official certified supplier of Islamic
Gold Dinar and Silver Dirham in the United Kingdom,
the company had just concluded a month-long series
of roadshows in May that saw it promoting the Gold
Dinar to Muslims in key UK cities such as London,
Birmingham and Edinburgh... Yet, as an anti-capitalist
weapon, the Islamic Gold Dinar is far from mint...
Its advocates say that the poor could never be taken
advantage of because the coins they own have intrinsic
value. But Britain's recent gold rush
dilemma suggests that the poor do not always get
their money's worth, even when trading gold. Like
paper money, gold is also vulnerable to the manipulations
of valuers, our gatekeepers of wealth."
See the FMX Metals Connect article (CLICK HERE).
Indonesia
is a backwater, but the introduction merits close
watch for trade with any Arab and/or Islamic nation.

◄$$$ A MASSIVE SILVER DRAIN ON METALS EXCHANGES
IS IN PROGRESS, IN RELENTLESS FASHION. SEE SCOTIABANK
AND H.S.B.C. FOR THE SOURCE OF DEMAND. A KEY FINANCIAL
SYSTEM POINT OF VULNERABILITY IS SILVER, WITHOUT
QUESTION. BRINKS REPORTS HUGE SILVER REMOVALS. SOME
BIG EVENT IS BREWING, LEAVING THE JACKASS TO CONJECTURE.
$$$

The current run on COMEX silver inventories is
not normal operating procedure. What is happening
with physical demand develops toward a crescendo.
A large portion of the withdrawn silver has taken
place from two specific depository sources. The
heavy demand is not uniform across all COMEX depositories
generally. Details indicate that the banks losing
most silver continue to be ScotiaBank and HSBC.
ScotiaBank, the object of rumors for many months,
has been suspected not to be in possession of adequate
physical precious metals in its vaults to cover
customer deposits. However, one excellent source
calls that claim highly inaccurate and its accusation
injurious. More to this story though. On a single
day in June, fully 630,000 ounces of silver were
withdrawn from other COMEX depositories on the exact
day that 610,000 ounces were deposited at ScotiaBank.
This is hardly a coincidence, the stuff that fuels
rumors. The telltale signs are evident that an
emergency transfer from depositories to offer a
grand assist to ScotiaBank came, so as to avoid
default on making a delivery. On a single Tuesday
recently, Brinks shipped a staggering 489,913 troy
ounces silver. The heavy withdrawal occurred at
several Comex-approved depositories. Virtually all
of it came from Brinks Inc.

ONE IS LEFT TO CONJECTURE: My personal belief
is that Brinks is assisting a couple dozen private
billionaires in removing gold & silver bullion
from London, New
York, and Switzerland. The bullion is heading primarily
to Hong Kong and Singapore,
but to some extent Dubai
also. They are preparing for a monster magnificent
event. A breakdown event is coming to the official
precious metals exchanges, maybe with defaults announced,
maybe with criminal charges delivered, maybe simultaneous
with a pathetic confiscation order by the USGovt
and UKGovt. But neutralizing the confiscation order
could be arrest warrants for several top Wall Street
and London bankers. To this end, on the drain
issue, a query went to my excellent reliable gold
banker source. He was a little tight lipped, which
by my experience means my conjecture is both on
the mark and too dangerous to confirm with actual
developments. He said, "The Boyz are in
for the mega-surprise of their of lives. They have
been measured, weighed, and marked for destruction
by being pushed on their very own sword, one at
a time. Once all is set and done, COMEX and the
Boyz are history." He refers to the US
& UK bankers. This is a time
for patience and discipline as well as caution.

A massive drain of COMEX silver inventories continues
unabated, and not much reported by the financial
press. Maybe the press regards it simply a commodity
metal like copper or lead. The COMEX reported total
silver inventories fell from 119.5 million ounces
on June 16th, to 113.56 moz on June 30th, in a mere
ten days. That is almost 6 moz, a 5% drop. Large
withdrawal declines have occurred on nine of ten
trading days in a row. The total amount of silver
derivative contracts in force greatly exceed the
available above ground inventories, and even exceed
many years of silver mining production. The run
will spread, if not already, to the physical gold
market. In a recent COMEX report, the physical
delivery of maturing gold contracts so far in 2010
ran 39% higher than for the same period of 2009.
Any gold and silver price rise (platinum too) from
the supply squeeze could bankrupt some major banks,
especially investment banks. In averting bankruptcy,
they would fuel the gold rally, even with aid from
governments and the monetary printing press. That
is precisely one way that the gold price surpasses
the $2000 mark, a bank squeeze. The global sovereign
debt crisis is the latest manifestation of the credit
crisis, with hidden demands for gold bullion. Further
contagion could result in a worseing run on COMEX
silver inventories. The most cautious, stodgy, and
slow-footed investors will provide additional demand
to push gold above $2000 and silver above $50, all
in time.

Patrick Heller is owner of Liberty Coin Service
in Michigan. He wrote in his newsletter, "If a this drain of
COMEX silver inventories continues, it could literally
be the spark that brings down the entire global
financial system. Any indication that owners
of paper silver may not be able to convert their
paper into the physical product will only increase
the demand to do just that." He describes
publicity as being one factor to cause a further
run on silver metal. See the Coin Update article
(CLICK HERE).

◄$$$ CANADA
SUFFERS A SHORTAGE OF SILVER COINS. THE KITCO VAULTS
HAVE COINS AVAILABLE ONLY IN THE UNITED STATES FOR
U.S. CUSTOMERS. THE SHORTAGE GROWS MORE ACUTE AT
A CONTROLLED LOW PRICE. $$$

Ed Steer of GATA and the Casey Research Group reports.
His expert coin information source shared recently
that the Royal Canadian Mint is running two to four
weeks behind on virtually all of their bullion products,
especially the 0.9999 silver Maple Leaf coin. Also,
Kitco has some important restrictions in force,
regarding the purchase of silver coins and rounds.
An official Kitco response was received. "Unfortunately,
many of the Silver products we sell are currently
out of stock for Canadians. As such, the items
are 'Only Shipping to the US.' Certain products are
'Only shipping to the US
' due to our inventory at our Vaults in Canada. In other words, our inventory is too low
(depending on the item) to accept any new orders
from Canadian or International customers. As
such, we would simply have sufficient inventory
to sell the items to US customer[s] as we also have Vaults located in
the United
States from where our products
are also shipped. The product will be once again
available, when we receive a new shipment of inventory.
In the meantime we suggest signing up for our Bullion
Alert Service' which provides an e-mail notification
as soon as a shipment arrives for the item(s) selected.
Except for the 1000-oz good delivery bar, they are
completely out of all silver inventory for Canadian
and international customers. Only if you live in
the USA is there anything
available at all." Some interpret this
news to mean that Canada
has succumbed to pressure to cover the US
shortage, obedient to the cartel like a captured
vassal.

◄$$$ CENTRAL BANKS ARE DUMPING GOLD THIS
SPRING AND SUMMER, A REVERSAL OF PREVIOUS MONTHS.
EUROPEAN CENTRAL BANKS, DESPERATE FOR CASH, ARE
RAISING CASH BY SELLING GOLD. $$$

The irony is thick. The central banks, predominantly
in Europe, are validating the
high value of gold by selling it. Rare among competing
assets, this shiny asset has value and can be sold
in a hostile financial market climate. The member
nation central banks had been building up their
gold hoards, or at least protecting them, but lately
have been dumping them. Central banks have entered
Gold Swap contracts. According to BIS records,
central banks sold 349 metric tonnes of gold bullion
since December, and raised $14 billion. The
Gold Swaps enable the exchange of gold with the
BIS in return for hard cash, under a stipulated
agreement to repurchase the gold at a later date.
It should be noted that these transactions do not
directly affect the open gold market, since the
gold does not enter the market. The contracts shift
the locations of cash and gold bullion among the
banks, with plenty of armored truck movement, the
parent firms providing cash extensions. Nevertheless,
it signals a shift in banker sentiment. One might
conclude that it signals a setback for advocates
of gold backed currency conception. My view is different.
It means European central banks are obstacles to
the grand Paradigm Shift that will launch a new
global gold backed currency. They will go kicking
and screaming, and thus be victims of the initiative,
not beneficiaries. The central banks have
almost no assets to sell of value, except gold (thus
bearing great value). They are broke, holding
toxic assets in their portfolio, led by cratering
sovereign debt and lifeless mortgage debt, unable
to sell their rotten paper to raise much needed
cash. This is a case of a desperate man selling
his family heirloom silverware, with nothing else
but torn furniture and worn appliances. See the
Business Insider article (CLICK HERE)
or the Financial Times article (CLICK HERE).

◄$$$ THE SAUDIS ANNOUNCED A SIGNIFICANT EXPANSION
IN THEIR OFFICIAL GOLD HOLDINGS LAST MONTH. THEY
CALLED IT RECLASSIFICATION. THE SAUDIS MERELY CLOSED
OUT A DECADE OLD LEASE TO THE ANGLOS, AS THE LONDON
BANKERS COVERED THE LEASED GOLD WITH PAYBACK IN
BULLION. THE WALLS ARE CLOSING IN ON THE US-UK GOLD
CARTEL. $$$

Try not to laugh at the 'Reclassification' ledger
item usage. A most bizarre ledger item was the surge
in Saudi
Arabia holdings in their published
official holdings. They shot up by more than double
from 143 to 323 tonnes in June. The Saudi Arabian
Monetary Authority, perhaps taking guidance from
Wall Street or London on twisted verbage, announced
"Gold data have been modified from First
Quarter 2008, as a result of the adjustment of the
SAMA's gold accounts." The above is recounted
from the June Hat Trick Letter Gold & Currency
Report. My suspicion arose immediately, since reclassification
sounds like accounting shenanigans to hide embarrassing
events. Besides, no large volume purchases have
made an impact with the news. So the Jackass contacted
a gold trader with associates out of the Persian Gulf for verification. My message went "So the Saudis
added a lot of gold without a bang echo or load
of rumors. My suspicion is that the Saudis converted
a raft of US/UK gold certificates from leases
in the late 1990's back to physical gold bullion.
It was all done quietly, under great pressure to
the Anglos. The move by the Saudis was intended
to prevent lost gold in the mix with criminal custodial
actions. Of course, one cannot prove it. But that
would explain the suspicious additions without huge
open market purchases that would not raised big
red flags and sudden jerky upward price movements.
Just thinking out loud, like a criminal, about criminals.
/ jim" His response was concise in confirmation.
He wrote, "Yes, the Saudis converted
leases back to gold, spot on suspicion."

◄$$$ THE SPROTT PHYSICAL SILVER FUND HAS
LAUNCHED, FOLLOWING THE GOLD FUND. SOME THINK THE
SILVER FUND WILL ATTACK JPMORGAN. TIME WILL TELL
WHETHER JPMORGAN SUFFERS WORSE NIGHTMARES. $$$

The Sprott Physical Silver Trust (symbol: PSLV)
is out. It complements the Sprott Physical Gold
Trust (symbol: PHYS) perfectly. See the SEC Edgar
listing (CLICK HERE).
The prospectus tells how investors can benefit from
silver without the inconvenience that is typical
of a direct investment in physical silver bullion,
like vaults and shipping. Certain tax benefits come
with capital gains treatment. To be sure, more physical
pressure cometh for the cartel that relies on paper,
having painted themselves into a metal corner. Sprott
fund managers are on course to order $280 million
for their new silver ETF. If any problems arise
from securing that much, between 15 and 16 million
ounces, some harsh publicity will come to light
and come quickly. The fireworks of July Fourth,
the time of the launch, could spread to the financial
markets in earnest. For JPMorgan to suffer nightmares,
they first need a conscience. They still operate
a paper factory laced with fraud, but with full
USGovt blessing and impunity.

The Sprott Gold Fund so far is a blockbuster success.
It traded over Net Asset Value at the launch, a
sign of heavy demand, which means over-payment for
original investors. The COMEX and LBMA are squarely
in the crosshairs for attack. Physical metal is
the great vulnerability. The silver market is much
tighter than gold. It as heavily interfered (manipulation,
intervention, control) by JPMorgan. The LBMA has
great challenges locating physical silver, a frequent
topic in the news. Fresh incremental demand for
over 15 moz silver is sure to present new problems
not possibly met by more paper silver issuance by
the criminals at JPMorgan who operate with impunity.
The legal license they hold cannot touch the power
of metal requirements. Their massive short silver
position coincides with less actual deliverable,
bringing the much grand short squeeze closer to
reality. Soon even paper metal will show limits,
since musical chairs are played behind the curtains.

Here are some observations on Sprott's latest offering
from the Financial Post. They display ignorance
of the paper certificate plague that wrecks havoc
in the corrupted Exchange Traded Fund arena, where
GLD gold has inadequate gold and SLV silver has
inadequate silver. They both have supplies raided
by London to meet futures contract delivery demands.
They both have their shares abused to offset massive
short contracts. In other words, the LBMA might
have a claim on almost ALL the GLD & SLV metal.
The Financial Post misses how conversion to metal
for investors is a sign of honesty and integrity,
and how dividends are a near total irrelevance.
They wrote the following.

"[PSLV] is convenient. All the proceeds
will be invested in physical silver. The silver
will be stored at the [Canadian] Mint and the trust
will be able to secure lower transaction costs than
investors doing it themselves. But the fund is geared
to those who like their income in the form of capital
gain. The trust does not intend to pay any dividends.
But one wrinkle is that once a month, unitholders
will be able to redeem all or some of their units
and receive physical silver. It is not immediately
clear why a unitholder would want to do that, other
than to provide unitholders with comfort that they
can get their hands on the metal." See
the Zero Hedge article (CLICK HERE).

The concentrated short positions always reveal
the smoking gun of price manipulation. The '8 or
Less' bullion banks are still short a grotesque
316.7 million ounces of silver, equivalent to 171
days of world production. In gold, the '8 or Less'
bullion banks are short 28.9 million ounces of gold,
equivalent to about 137 days of world gold production.
These are called 'Concentrated Short Positions'
for a legitimate reason, since they are concentrated
within the gold cartel, where illicit activity is
the norm, with government sanction.

◄$$$ JOHN EMBRY SPEAKS ABOUT GOLD. HE FINDS
NO LONG-TERM VALUE TO THE USDOLLAR. THE MONETARY
GENIE IS OUT OF THE BOTTLE. GOLD IS ON THE VERGE
OF ASSERTING ITSELF WITH A SHOCKING PRICE RISE.
HE GIVES A CRITICAL SLAP TO JEFF CHRISTIAN, A CORRUPTED
SHILL. $$$

John Embry of Sprott Asset Mgmt is a fine gentleman
who thinks clearly, sees the gold market clearly,
and expresses his views clearly. We met in October
2008 at my final Canadian Conference and spoke for
almost an hour. He was curious how the Jackass gained
such insight and could make so many correct forecasts,
not coming from the financial realm. My response
was that statistical analysts are extremely bright
people with a firm ability to analyze many markets,
who do not bend toward corrupted data. Embry made
numerous excellent points in his latest essay. He
expects the COMEX to rise and restore its prestige,
after having painted itself in the corner. He believes
it will be forced to act or lose all credibility.
He points out how the strong gold investment demand
has taken over where the declining jewelry demand
has left off. In fact, decline in jewelry demand
is a telltale historical signal of a powerful gold
bull market, the exact opposite message delivered
by the mainstream controlled press.

Embry cites the new normal of more debt monetization,
lacking any alternative, as austerity is a pipedream,
the result from which will be an unlimited gold
investment demand. USGovt debt has exploded, from
3.1% of GDP in 2007 to 9.2% of GDP in 2010. He
lays into Jeffrey Christian of CPM Metals as implicitly
a liar, after Christian stated that central banks
have indifference to gold since such a small market,
and after Christian misrepresented the 'Brown Bottom'
sales of UKGovt gold in 1999, claiming the sale
was long comtemplated, fully telegraphed in disclosure.
In fact, not mentioned by Embry, the massive sale
at the cycle low was orchestrated to bail out DeutscheBank.
The big German bank was caught in a massive short
position in gold. The key conclusion quote from
Embry was, "I strongly suspect that JPMorgan's
famous adage uttered a century ago that 'Gold
is money and nothing else' is about to reassert
itself in a big way and the resulting price impact
is absolutely going to shock the skeptics on gold...
The great news is that all manipulations ultimately
fail, and when this inevitably occurs in the precious
metals area, the upside impact is going to be huge."
See the Sprott Investment Digest June issue entitled
"USDollar's Collapse Inevitable"
by John Embry (CLICK HERE).

◄$$$ PORTER STANSBERRY MAKES COMPELLING ARGUMENTS
ABOUT THE UNSTOPPABLE RISE OF GOLD. HE CALLS GOLD
A HEDGE AGAINST CATASTROPHE. HE ANTICIPATES A COLLAPSE
OF THE USDOLLAR ROLE AS RESERVE CURRENCY. THE USGOVT
DEBT CANNOT BE REPAID, AND EMERGING ECONOMIES HAVE
GROWN SO MUCH. HE EXPECTS GOLD TO RETURN AS A BANK
RESERVE FASTER THAN PEOPLE THINK. $$$

In an interview with The Gold Report, Porter Stansberry
lays it out succinctly and in a manner that only
a compromised intellect can deny. He said, "We
were telling our readers to buy gold beginning in
2001 and 2002, but that was simply because we thought
the US dollar had become unsustainably strong. We
expected it to fall, and since gold is inversely
correlated to the dollar and is priced in dollars,
our recommendation was just based on value. As inflation
was heating up, it made sense as an inflation hedge
too. And now we think gold makes sense as
a catastrophe hedge. What most people do
not understand is that as the world's reserve currency,
the US dollar is considered the highest caliber
reserve by central banks and private banks around
the world. When foreign countries want to increase
their money supply, when private banks want to expand
their loan portfolios, they acquire dollars to have
in reserve. That has powered an enormous current
account deficit and an enormous expansion of government
debt in the United States. The United
States is just no longer a
big enough economy to be the world's only reserve
currency anymore.

This entire [monetary] system is going
to collapse, and there are two compelling reasons
why.First, the US government clearly cannot
afford these debts. Total government debt outstanding
has surpassed $13 trillion, more than 100% of GDP.
There is no question that it cannot be repaid. But
secondly, there is also no question that the world
economy needs other reserves because the emerging
markets have grown so large and other economies
are now much bigger in relation to the US than they were 20 years ago. We need a whole
new standard of reserve currency... Throughout the
history of mankind, even into the 1900s, gold was
the only thing all trading partners could agree
upon and rely upon. There is no doubt in my
mind that gold will become the reserve currency
once again. It will drive demand for gold way
up, and therefore the price of gold will go way
up. There is no way the market has begun to
price in that change going forward, and I see it
as inevitable... My bias is that it is going to
happen sooner than anyone believes possible, but
that still may not be for another five or 10 years.
More and more of the US government's creditors
are already complaining about Quantitative Easing
and the country's debt load. And the Obama Admin
has been completely cavalier about the size of these
debts. They are continuing to mount, to $1.6 trillion."

◄$$$ THE PAULSON FUND WAS HIT BY $2 BILLION
IN REDEMPTION DEMANDS. SO THE CRIMINAL FRAUD INVESTIGATION
ON PAULSON, RELATED TO MORTGAGE BONDS SOLD BY GOLDMAN
SACHS, HAS SOME COLLATERAL DAMAGE TO GOLD. $$$

Absolute Return+Alpha reported that the major $33
billion hedge fund managed by John Paulson has been
significantly drawn down. The fund had participated
in the Abacus transactions with Goldman Sachs, the
subject of legal prosecution and civil lawsuits.
Frightened investors removed $2 billion from redemptions
by the end of June. Mortgage bond assets and gold
assets were mixed within the same fund. The fund
has sported a horrendous performance in June. Regardless,
widespread liquidations have come to the Paulson
fund's gold portfolio, which accounted for 30% of
the its total assets. The primary vehicles used
were the controversial Exchange Traded Fund (GLD),
gold mining stocks, and other assets. See the Zero
Hedge article (CLICK HERE).

China is the site of the second largest gold demand
globally. Their gold demand in terms of gold
volume traded on the exchange rose a sturdy 59%
in the first six months versus the same period in
2009. The volume rose to 3174.5 metric tonnes,
according to Song Yuqin, vice general manager at
the exchange. Silver trading volume skyrocketed
more than five-fold during the same period.
Citizens are concerned about stock market turmoil
and unstable property prices, amidst a backup of
European sovereign debt market instability. Then
there is gold demand. Hou Huimin is deputy secretary
general at the China Gold Assn. He said, "I
expect China's
gold demand to rise by 11 to 12% this year to 440
to 450 tonnes, because Chinese investors have shown
their willingness to buy more when prices are on
the rise. I expect prices will rise over the remainder
of this year and next year." The gold response
is widely seen as a direct consequence to the Chinese
Govt crackdown on property speculation. They are
overheating, a big tail on the US
bubblicious monetary policy. Some policy measures
announced after a reported 11.9% economic expansion
in 1Q2010 were to raise the minimum mortgage rates
and some down payment ratios. Officials are considering
a trial property tax. Details on actual gold demand
are quietly staggering. Sales of products such
as gold bars and coins by China National Gold Group
Corp rose 40% in the past six months. The group
possesses the nation's largest gold deposit. Chinese
gold output should rise about 5% this year, lengthening
China's
lead position as the world's largest producer. Notice
the demand growth outstripping the supply growth
in output. China produced 313 tonnes of gold last year, according
to a group executive. China is unique among nations, with public gold
demand from citizens annually at a volume that eclipses
even the government purchases. See the Business
Week article (CLICK HERE).

◄$$$ RUSSIA
BUYS A BUNCH OF GOLD. IMAGINE HOW MUCH GOLD THEY
ARE PURCHASING OUTSIDE THE OFFICIAL REPORTED CHANNELS.
THE KREMLIN WILL NOT BE HONEST WITH THE UNITED STATES.
$$$

The Russian Govt continues to accumulate gold bullion
in its official reserve holdings. They purchased
27.6 tonnes of gold in the last quarterly reporting
period, which moved its total to 668.6 tonnes. According
to the latest IMF data, in the period between April
and May, the Russian Govt added another 22.5 tonnes,
bringing its May total to a new record of 703.1
tonnes. The gold reserve holdings data was presented
by the World Gold Council. While Russia and China have been adding gold reserves, the IMF
has been drawing down. The East accumulates wealth,
while the West removes wealth, a hallmark signal
to the global Paradigm Shift. The gold holdings
at the IMF fell by 15.25 metric tonnes (490,286
oz) during April and May. Reserves of gold at the
IMF were 2951.58 tonnes at the end of May versus
2966.83 tonnes at the end of April. Global central
banks have grown in their appetite for gold in reserves,
seen as a prudent counter to the increasingly toxic
sovereign debt they hold in extreme volumes. The
IMF is on course to anger Eastern nations who boast
growing gold hoards and growing distaste for Western Govt debt. The IMF has given indication that they will continue
to sell the remaining 137.5 tonnes on-market as
opposed to off-market transactions with other central
banks, a step to anger Asia immensely. The consistent but mangled IMF policy to sell gold,
raise cash, aid the central banks, but keep the
gold price low is inviting a sharp angry response.

◄$$$ MEDVEDEV DISPLAYED A GOLD COIN AS A
PROPOSED NEW GLOBAL CURRENCY AT THE G-8 SUMMIT. IMAGINE A HOT POKER UP THE WESTERN BANKER
RECTUMS. THE RUSSIAN PRESIDENT IS GIVING A SNEAK
PREVIEW OF THE NEW NORDIC EURO, BUT WITH A NAME
CHANGE SWITCHAROO FOR PRESENTATION PURPOSES. $$$

Whether intended as a preview of the New Nordic
Euro currency, backed by a gold component, or a
rehash Straw Man from the old cabinets at the Intl
Monetary Fund, the item on display by Dmitry Medvedev
left the Western bankers with a zinger, something
to keep in mind, something to keep them up at nights.
Some regard the new currency (manifested in coin)
to be the Special Drawing Rights from the IMF, the
bastard basket concoction of existing major currencies.
The unmistakable part of Medvedev's message was
the clear giant stride desired AWAY FROM the USDollar
as global reserve currency. My personal belief
is that the coin symbolized a chip on the currency
table, and a hint of its laced gold component. The
Russian President has called for a global currency,
which has not yet gained much traction from G8 finance
ministers. His proposals served as a repeated urge
of his message to the April G-20 meeting in London,
when he pushed for a supra-national currency. He
proudly displayed the coin, which bears the English
words "United Future World Currency"
to journalists at the summit finale in the Italian
town of L'Aquila. Why would he be so enthusiastic or proud, if not for his
participation in the new currency initiative? Medvedev
has put visible public weight behind the IMF SDR
movement and its trivial minimal showcase planning.
He has put secret private weight behind the New
Nordic Euro currency movement and extensive planning.
The hint on the coin is its resemblance to the Euro
Coin. It features five leaves for the five continents,
much like the five Olympic rings. By the way, no
doubt in my mind that Putin is working on the strategic
development and planning with Germany on the New Nordic Euro. It is that important
to the strategic balance of global power. Putin
is all about pursuit of power, but not dominant
power, only more balanced power in healthy interdependence.

Russia
and China have been vocal advocates of diversification
away from the US$-based
global currency system. Medvedev has repeatedly
called for creation of a mix of regional reserve
currencies as part of the drive to address the global
financial crisis, while showing distrust and scorn
for the USDollar's future as a global reserve currency.
Such propositions fit within the current monetary
framework. He blames the USDollar for much of the
global financial instability, with economic repercussions.
French President Nicolas Sarkozy at the summit joined
the band, urging that "We cannot stick with
just one single currency." Earlier Medvedev
handed out the coin as gifts to leaders, pushing
the notion that leaders were beginning to think
seriously about a new global currency. Medvedev
said, "In all likelihood something similar
could appear and it could be held in your hand and
used as a means of payment. This is the international
currency... Here it is. You can see it and touch
it. [A global currency] concerns everyone now, even
the mints. [The sample coin] means they are getting
ready. I think it is a good sign that we understand
how interdependent we are." The nature
of the Straw Man SDR is to take the movement off
the USDollar. Then comes the gold backed currency
after the locked grip of the USDollar has gone.

Observe the pretty shiny coin. It symbolizes an
end of USDollar Tyranny. See the Breitbart article
(CLICK HERE)
and the Bloomberg article (CLICK HERE).
The USDollar slowly is being rejected on a global
basis. It is regarded as a license to defraud, a
license to counterfeit, a license to wage war without
cost, and a license to float an irresponsible economy
on credit lines without proper responsibility.

◄$$$ READING MATERIAL $$$ Check out the outstanding
article entitled "What's Behind the Global
Flight to Gold?" by Gary Dorsch (CLICK
HERE).
He provides an historical background on gold with
up-to-date references to the important corners of
the globe. The gold price is tracking sovereign
debt levels. His work is consistently top shelf.

GOLD PRICE IN
HOLDING PATTERN

◄$$$ GOLD IS NOWHERE NEAR A BUBBLE. ON A
MAJOR NATION BASIS, THE GOLD VALUATION RELATIVE
TO STOCK & BONDS IS A MERE 7% RATIO. FOR NASTY
DANGEROUS BUBBLES, REFER TO THE USTREASURY BOND,
EUROPEAN SOVEREIGN BONDS, AND MORTGAGE BONDS. GREAT
WEALTH WILL BE LOST IN GOVERNMENT BONDS, JUST LIKE
THE MORTGAGE BOND WRECKAGE THAT HAS ONLY PLAYED
OUT 10% OF THE WAY. $$$

The gold futures option contracts are telling a
very intriguing story. The open interest of leveraged
gold options far out are surging. The conclusion
is simple. Some smart money is placing some serious
chips onto the golden squares at the casino, but
later in 2011, not this year. Gold Core reports,
"Data from the gold options market shows
that smart money believes that gold will go higher
in the coming months, and that the recent fall in
prices may be another correction and consolidation
prior to another move up in prices. Open interest
in options, which allow holders to buy gold at $2000
an ounce by December 2011, has surged a massive
11-fold on the Comex since May 11th. Open interest
to buy at $1500/oz by the end of the year has fallen
by 33%, which suggests that gold market participants
remain unsure of gold's short and medium term
prospects but confident of higher prices in the
long term." An article was put together,
actually more like a laundry list of analysts. Each
believes the gold price will rise to great heights.
A parabolic move is highly likely between $2500
and $15,000 per ounce. See the GoldSeek article
(CLICK HERE).

Sentiment Indicators are pointing very favorably
for gold & silver, after a few months of consolidation
and meandering. The sentiment indicators tracked
by Mark Hulbert have been shown to be particularly
accurate for forecasting moves in the precious metal
prices. As usual, they are contrarian in nature.
The MarketVane Bullish Consensus for gold lost a
point to 63% and the HGNSI slumped 14.3 points to
9.2% in a recent track. This Market Vane index has
not been this low since August 28th 2009, before
gold staged a major move of over $200 per ounce,
logged in October and November. The HGNSI is rarely
this low. A notch in the HGNSI below 30 signals
a bull move in gold & silver. Thanks to JB Bullion
report for his note. He also provided news on physical
demand from Standard Bank. They wrote, "With
gold below $1200, the demand response from the physical
market has swung from resistance to strong support,
as gold selling and scrap sales have dried up.
Our Standard Bank physical gold index has bounced
into highly positive territory." Scrap
is an excellent marginal signal. See the Truth in
Gold article (CLICK HERE).

◄$$$ GOLD MINING STOCKS ARE POISED FOR A
BIG BREAKOUT MOVE UPWARD. JUST ONE MAN'S OPINION,
BUT A FELLOW WITH A STRONG TRACK RECORD. $$$

Chen Lin is a golden boy in mining stock investments.
He has embarked on a path that has borne 200-fold
profits since December 2002, through shrewd value
picks and fine market timing. He is on record as
calling for gold producer shares to make a move,
as they are poised for a breakout. Chen wrote, "Every
gold producer is making an incredible amount of
money, and the market does not appreciate that
much. That is a very interesting phenomenon. One
thing will happen, either gold has to come down
significantly or gold shares will go up significantly.
I believe it is the latter." Much appreciation
to The Gold Report for the Chen Lin interview.

◄$$$ ACKERMAN BELIEVES THE CHINESE YUAN DECISION
TO REVALUATE UPWARD WILL HARM THE USDOLLAR AND GIVE
GREAT LIFT TO GOLD. THE TRIGGER TO PULL IS THE YUAN
CURRENCY AND THE DEVICE IS THE EXPORT TRADE. WE
ARE WITNESSING THE EARLY STEPS FOR CHINA TO STEP ASIDE FROM A
TOTAL USDOLLAR DEPENDENCE. IN DOING SO, THEY WILL
SACRIFICE SOME WEALTH. $$$

Rick Ackerman is a sage analyst. In past Hat Trick
Letter reports, he has been criticized for his gloomy
outlook regarding deflation, which continues to
be misused in terminology. He has been a bit too
bearish on the gold price as a result, seemingly
discounting the extreme monetary inflation that
the falling asset climate has triggered by pressured
bankers. He commented on the Chinese dilemma. They
have too many US$-based
bonds held in reserve. They want a higher Yuan currency,
but that pulls a small group of plugs from under
the US$-denominated
vat. They wish for Chinese wages to grow, but that
will cause higher export prices, and lower imports
into the United States
and Europe. They want more
independence from the USDollar, but they have built
their entire reserves and sovereign wealth funds
using it. They have invited a cancer into their
house in order to facilitate an industrial expansion
in the 2000 decade. Times are about to change,
with the USTreasury downgrade, announcement of a
Yuan upward revaluation, and tighter policies toward
the real estate bubble.Beijing
has given loud signals of turning a major policy
corner. Ackerman puts his perspective on this enigma
facing China. He clearly calls the United States a worse case than Greece, if not for the USGovt
free pass with the Printing Pre$$, an abused privilege.
Global acceptance of the USDollar
enables its abuse, and keeps the USDollar
from crashing on its own merits. Its financial footing
is beyond horrible. It resembles a Third
World nation.

Ackerman wrote, "Imagine everything the
United States and the rest of the world buys from
China
costing more. Then imagine China's
exports falling as a consequence, leaving the country
with far fewer dollars to buy USTreasury debt. Well,
it is no longer something that needs to be imagined,
for that is exactly what China intends. With the
nation's foreign currency reserves edging toward
$3 trillion, most of that in US dollars, it was
time for China put an end to a greenback support
operation that had long since grown beyond the
bounds of sanity. That is not to say, however, that
Chinese support for the dollar has outgrown its
usefulness, for the arrangement has given the USTreasury
the appearance of solvency, freeing up easy
credit for US consumers with an insatiable hunger
for Chinese goods.

All of that is about to change though,
and with it the status of the dollar as the world's
reserve currency. We find it remarkable
under the circumstances that, a week after China's decision, the dollar has yet to implode,
nor Gold to erupt, presumably with sufficient force
to leave the $1300 threshold behind in a cloud of
dust. It is difficult to think that both of these
things will not occur, although it may take a shift
in the sheep-like thinking of money managers, since
they are deeply conditioned to believe that the
Dollar and Treasury paper are 'Safe Havens' even
though a US without recourse to printing press
money would look far worse than that supposed financial
basket case, Greece."

◄$$$ TYLER DURDEN OF ZERO HEDGE EXPLAINS
THE SELLOFF IN THE FIRST FEW DAYS OF JULY, BASED
LARGELY UPON EUROPEAN ASSET LIQUIDATIONS. GREAT
DISTRUST LURKS BETWEEN BANK COUNTER-PARTIES IN A
HEAVILY NESTED INTER-CONNECTED BANKING SYSTEM. END
OF QUARTER BOND FUND WINDOW-DRESSING CAUSED SHORT-TERM
BOND REPO DEMAND THAT SET OFF A CHAIN REACTION.
$$$

Tyler Durden is a pen name for the editor of Zero
Hedge. In the Hat Trick Letter, the website is quoted
frequently. It is loaded with gems. My great respect
for the website is showing, as it is probably the
premier website for keeping tabs with financial
market crisis details on a daily basis, especially
with shorter clips. Zero Hedge offered many articles
with great depth as to the complexity of certain
markets. Financial engineering has rendered the
US markets a complex form
of layered structures and hidden planks, impossible
to fully comprehend even for the most adept afficionado.
Hats off to ZH, which has my utmost respect. Durden
is a true warrior. A private conversation with another
person with deep experience on Wall Street revealed
that Tyler Durden is actually an extremely smart
fellow with many years of Wall Street firm experience,
deep in the caverns, with numerous excellent deep
sources and contributors. When Durden talks, people
should listen. The name is taken from an avant garde
movie entitled "Fight Club" with
Brad Pitt and Edward Norton. The photo of Durden
on articles shows a bloody face, a fitting symbol
for a Wall Street insider veteran.

Durden offered a perspective on the plunge in the
gold price in the last month. In a springtime Gold
& Currency Report, my forecast, loosely stated,
was for the Euro to find support near the 120 mark
and push higher after some incidents and broad salvage
initiatives. My expectation was for a short cover
rally to occur somehow some way. Bear in mind that
my Euro forecasts had been incorrect regarding defense
at the 135 mark and later at the 127-128 mark. The
fringe of Europe took control of the Euro currency,
as the core of Europe worked
more slowly to cut the Latin fat off than expected
on my end. The politics of finance is a slow process,
first to defend status quo, second to pursue alternatives
during crisis. The Euro simply fell too far not
to present an opportunity to orchestrate a short
cover rally off 120. Also, the Euro fell so much,
that its relative price to structural forces simply
went too low to be sustained. It will probably go
much lower, but only after the 130 mark is tested.

Durden explained that gold fell below $1200 as
asset liquidations spread like wildfire. Trust in
counter-parties is vanishing in Europe.
End of quarter window dressing by bond fund managers
resulted in a surge in demand for 3-month Euro Repo.
That surge ignited a fire that spread, with the
contagion fueled by distrust within a highly interwoven
bank & bond structure across Europe.
Ever since the Greek fires began inside the PIIGS
pen, the Europeans have come to regret their inter-connected
nature. That cross investment of debt has been covered
in the past Gold & Currency Reports, as each
nation owns each other's debt in non-trivial fashion.
The short covering in the Euro should be viewed
as very negative for the future prospects of the
Euro, due to its unsustainable strength and the
lack of new investment funds to support the move.
Hence, a USDollar rally might be setting up,
but it is again a Death Rally based in systemic
failure. The world struggles to discard the
USDollar.

Durden wrote, "An ongoing topic discussed
recently is the slash and burn ongoing in Europe,
as banking counter-parties have exactly zero confidence
(and less with each passing day) in their counter-parties.
The backstop by the Euro Central Bank of everything
(for now) is the only thing keeping the system from
collapsing. Yet with the EuroCB now at over $1 trillion
in backstop funding for European banks, there will
be a point beyond which not even the central bank's
credibility will be enough. Today [July 1st],
we are seeing a spike not only in Libor and Euribor
(both Euro denominated), but most notably in the
30-day Repo Rate. The result is a scramble to fund
EUR positions. Whether the catalyst was this morning's
6-day ECB liquidity providing market operation at
this point is immaterial. The outcome is one
of the biggest surges in the EURUSD [Euro rate per
US$] in the history of the pair, which at last
check was fast approaching $1.25. This EUR surge
is nothing more than a liquidity scramble and should
in fact be interpreted as EUR adverse and is
indicative of an even worse funding pictures in
Europe and among European banks."

Durden wrote later the same July 1st day, saying
"The European liquidations we discussed
earlier [above], courtesy of the Euro Central Bank
Main Refinancing Operations and the Repo Rate spike,
which resulted in a massive EURUSD covering squeeze,
have followed through into industrial commodities
such as oil and lastly into gold. And as liquidations
are merely emblematic of a broken liquidity system
(as the name implies), the unwind behind the scenes
must be fierce. On the other hand, as the only
recourse to prevent an all out systemic collapse
should the deflationary trend continue, from Ben
Bernanke's perspective, is just to print more
money and thus solidify the position of the
precious metal as undilutable and a currency
which cannot be backed with toxic Mortgage Backed
Securities and Greek Sovereign Bonds, today's
selloff is a much welcomed respite for the commodity
which traded at record highs as recently as this
week. Also, our recent disclosure of precious metals
market manipulation via disclosed COMEX-OTC arbitrage
by such former behemoths as AIG then (and presumably
JPM now), should only add to your comfort that once
the finger on the scales is removed, the natural
reaction will be that of a coiled spring."
He strongly implies much higher gold prices
are coming in the future, after the Euro short cover
rally loses its gusto. See the Zero Hedge articles
(CLICK HERE)
and (CLICK HERE).